Read This First
I scan lease prices for pickup trucks regularly. Because my family owns more bicycles than I can count and I still get sucked into scavenging for free firewood from time-to-time, a pickup truck is really appealing to me. I hear wildly varying numbers though on cost. From $200 a month to lease to $1,000 a month to own. And the $200/month option comes with a Capital Reduction Fee that could choke a horse.
My future clients buying their first condo (or house) have the same curiosity. I get it.
“Can I afford to buy a house?” they ask themselves and typically answer by Googling Mortgage Calculator. They punch in a price and get a payment. But the principal and interest is akin to the $200 a month lease payment; it only tells half the story.
The mortgage calculator spits out a payment of $1,234/month and the future home owner is off to the races.
But consider some of these variables: a single family, condo, duplex and 3 and 4 unit properties all carry different interest structures and terms. The best interest rate requires a 40% down-payment. [If you think a car dealership advertisement has a lot of asterisks and disclaimers, please know the real estate and mortgage industries have even more!]
So what rate should a buyer enter into the calculator? In most cases the human eye is drawn to the lowest, most appealing number which may be a teaser or adjustable rate, or require costs to obtain it (points). Points are a Red Flag – and while sometime necessary (rare) they should always be considered in earnest.
Here are some other factors a calculator cannot show: mandatory real estate tax of $300-$900/month (general range), required Home Owners Insurance estimated at $75-200/month, Non Negotiable Condo fee $200-$600/month (depending on amenities such as pool, elevator, gym). PMI or MIP can run and additional .25 to 1% on the cost of the money ($40-$400/month depending on FICO score and size of down payment).
Its easy to see how the “extras” on the mortgage payment could equal an ADDITIONAL 40-80% of the base payment!
If there was a telephone number I could call and talk through a pricing scenario on a pickup truck, I’d probably be driving one today. On the home buying topic we are that company. Call. Talk. Listen. Learn.
No sales script …. Ever.
We promise that our goal isn’t to “get you to come in”, our goal is to educate you and have you “want to come see us”.