How Much Home Can You Buy with $97K Income with a Low Down Payment

The Seattle City Council recently passed a ban on evictions during winter months in Seattle. I’m all for protecting people when the weather is hazardous, however winter in Seattle is often quite mild. I’m actually very concerned about this legislation and how it may impact the rental market. I’m betting we will see more people decide to sell their Seattle investment property and move to other cities that are friendlier to landlords. Especially once you factor that Seattle laws prevent landlords from being able to screen potential tenants (it’s first come/first serve despite criminal history) and that landlords can only collect up to 1 month’s rent (plus 25% of one months rent if they accept pets) which can be paid over six months. Landlords are really in a risky position if the property is under Seattle’s regulations.

There are some exemptions to the eviction ban legislation, including income limits. It appears that in order to qualify for the eviction ban, you must have income lower than the median per household. Based on current limits, if you are a single person, the income limit is $76,000. If you are a family of three, the income limit is $97,750. One extra kiddo will raise the income limit to $108,600.

I often see in social media threads people upset about how high their rent is or that it keeps increasing and I wonder why they don’t buy and start investing in THEIR future instead of the landlords. I thought it would be interesting to share how much home one could buy assuming they make roughly $97,000, assuming they don’t have much saved up for down payment and their credit is not perfect.  The scenarios in this post will be based on a low-mid credit score of 620 with a household of 3.

After crunching some numbers, it looks like an FHA loan would probably pencil out the best for someone with credit scores of 620 needing a low down payment. However, if you have served our country, a VA loan is an EXCELLENT option! Contact me for more info.

This scenario compares rent to buying a home priced at $500,000 with a minimum down payment using an FHA mortgage. With a 620 credit score, the total mortgage payment comes in lower for this scenario. Higher credit scores could make a conventional mortgage more appealing.

The first column is factoring in a monthly rent payment of $2500 plus $20 per month for renter’s insurance. Net monthly payments are factoring tax benefits, assuming married filed jointly. The last section is estimating potential net worth with appreciation of the home, plus paying down the mortgage to create additional equity. NOTE: Please contact your CPA for tax advice, I am not a tax professional – I am a strictly a mortgage professional. 🙂

Here’s a link to the report where you can dig in a little deeper to this report.

Back to the summary section, with an FHA 30 year fixed mortgage (second column) the interest rate could be priced with more points to lower the rate, my intent was to keep the cost down for this scenario. The total estimated payment is $3,114.24 with roughly $28,339 estimated funds for closing, including the down payment. This is based on a rate of 3.875% (apr 4.971%).

The last column is using down payment assistance, which is eventually paid off when you sell or refinance the home. The estimated payment is $3,220.96 with estimated funds for closing at $6,336.50. This is based on a rate of 4.250% (apr 5.298%) on the first mortgage and a note rate of 0% on the down payment assistance/second mortgage. NOTE: When the down payment assistance exceeds the actual down payment, it is applied towards closing cost and reserves.

Rates quoted are as of February 12, 2020 at 1:00 pm and are subject to credit approval. 

About the funds for closing with these scenarios… FHA allows the down payment to be gifted by a family member. The seller can potentially contribute towards allowable closing cost and reserves if negotiated in the purchase and sales agreement.

If you are considering buying a home… even if it’s in the next year or two, I HIGHLY  recommend that you contact a licensed local mortgage professional to help you create a game plan. Things that are common sense to you and me may not be the best steps in the home process – such as paying off or down debt vs saving up for a down payment.

Of course, if you are considering buying (or refinancing) a home located anywhere in Washington state, I am happy to help you!

There Once was a Renter

I was just reviewing one of my client’s mortgages and thought I’d share a happy story with you. I’m REALLY proud of them. I first met Ryan and Rachel Renton (yes, I made up the names…but the rest of the story is true), at a home buyers class that I was teaching. Home buyers interested in the down payment assistance programs offered by the Washington State Housing Finance Commission are required to take a “live” class or an online class in order to qualify for the down payment assistance (dpa). [Read more…]

Buying a Home Using Your S.O.’s Income

Recently I helped a couple buy a home in King County. They’re engaged, had been living together for many years and were ready to purchase their first home. One of them, Billy Bellevue, had some credit issues and it made more sense for them to only have Susie Seattle’s on the transaction. [Read more…]

A First Time Home Buyer’s Story

I’m so excited for some clients I helped buy their first home a couple of years ago. I thought I’d share their story – at least the Readers Digest version! 🙂

This couple attended a home buyers class that I was teaching back in 2014. They purchased their first home in Seattle in 2014 using a down payment assistance program we offer through the Washington State Housing Finance Commission. [Read more…]

Coming Soon: Freddie Mac’s HomeOne Mortgage Program

Later next month, Freddie Mac will be offering a new program for first time home buyers. This mortgage program offers low down payment options without the income limit or geographic restrictions that Home Possible has.

HomeOne will be available for both purchases and rate-term refinances on single family dwellings. At least one borrower on the application must be a first time home buyer when the transaction is a purchase and home buyer education is required. [Read more…]

eBook: Your First Home Mortgage

I have just updated my guide on how to finance your first home.

If you’re thinking about buying a home located anywhere in Washington state, even if it’s a couple years away, I am happy to help you! You really cannot start the preapproval process too soon. If I can help you, please contact me.

New Updated Guide Book for First Time Home Buyers

Hot off the press (or keyboard?)! The eBook that I wrote for first time home-buyers has been completely updated. Please feel free to share this with anyone you know who is considering buying a home anywhere in Washington state. You can access the eBook below or by clicking this link: Your First Home Mortgage Guide Book by Rhonda Porter 

 

Of course, if you’re considering buying your first, second home, vacation or rental homes in Washington state, I am happy to help you! Click here for a no hassle rate quote or here to start the preapproval process.

UPDATED: First Time Home Buyers Guidebook

I have just updated the e-book that I wrote for first time home buyers.

Please feel free to share it with anyone you know who is considering buying a home in Washington state.