Would you confirm this online calculator for me?

**kork13** · 11-07-2010, 12:05 PM

it's not really a very high-end calculator, though very little of what you find online will be... If you read the notes, it basically allows a 28% (of gross) monthly payment for the 'conservative' estimate, then works backward from there. It takes out taxes, insurance, then runs the interest rate, downpayment, and monthly payment amount to determine what you "can afford" as your purchase price. The 'aggressive' estimate is the same, except it uses 36% of gross. It's accurate enough if that's what you're looking for, and gives you a ballpark estimate, but I personally wouldn't use it for much more than that.

**Scanner** · 11-07-2010, 12:22 PM

Thanks. . .but that's what I just kind of need - direction.

My mind is really whirling right now with the divorce and relocating and I really don't know what to do.

I did find a house below even my conservative estimate. It's older but I really like it - it's a Cape Cod with 3/4 bedroom/den type of set up. But the woman is out of there into a nursing home and the family may be willing to lease/purchase.

The only downside I could see to it was it was built in 1950 and is fitted for hot water heat with oil. Which is fine. . .hot water heat is very efficient. But no central air and I admit I may be spoiled on that and I am not sure how much it is to install HVAC for central air in a house. . .probably 20K.

Still, I may have the beach trailer to escape to in the summer making it not too much of an issue that could be combatted with window air units on the nights I am alone in there without air conditioning.

Man. . .I hate making major life decisions in a hurry.

**scfr** · 11-07-2010, 01:56 PM

I had to run a hypothetical because when I entered what we really put down on our house (paid cash = 100%) I got some truly insane numbers. What I did instead was enter 20% of what we paid for our current house as the down payment.

The conservative number was 2.7 times what we paid for our house, and the aggressive number was 3.2 times what we paid for our house.

I have always felt that we could have bought a house that was twice what we paid for ours (because we live in a LCOLA) without feeling squeezed.

I noticed that the calculations are based on what lenders are willing to lend. Personally, I think that's too much for most folks, with the exception of young folks who are buying their first house. (I don't have a problem with 20-somethings stretching a bit for their first place.)

Me personally, if I were living back in a HCOLA, at my age, I'd be willing to spend 70% of the conservative number on a house.

I'll be the first to admit that I like to have a lower percentage of my net worth in my primary residence than the "average Jane." Do what you feel comfortable with of course, but just consider that the numbers might be on the high side.

If you can get a screaming deal and feel that real estate in your area is poised to rebound, and you would be willing to sell the house if you could net a nice profit, that's a different scenario.

**Scanner** · 11-07-2010, 02:01 PM

Well, I would say I am probably going to get the house for 10-20% lower than teh conservative number, if I were to assess the circumstances and the market but not quite 30% lower like you say.

So. . .I can't see too much downside risk other than the house is old. Everything will be hedging on the home inspector.

**scfr** · 11-07-2010, 02:14 PM

Definitely a personal thing; everyone is going to have a different comfort level. Sounds like pricewise it's fine for you ... just a question of deciding whether or not you really like the house and want to deal with it's "age related issues."

How many houses have you looked at? If it's not many, I would suggest visiting a bunch of other houses so that you have more basis for comparison. You may find something you like more for the same price.

Good luck with whatever you decide to do.

**Scanner** · 11-08-2010, 07:11 AM

Scfr,

Thank you. . .but as I have gotten older, I have learned to assemble a close group of advisors and trust them at times.

My real estate agent (the buyers' agent) has been a good patient of mine for 13 years, sold our first home, knows my personal situation and is a current mayor, former tax collector, a real estate agent and owns 4-5 properties.

I told her I am turning a lot over to her at this point and just having her "pick me a house" (like picking a bride, lol). She is showing me one more this afternoon and she knows how I feel about leasing and renting and she seems to think if I need to bail on this, landing it as a rental would be no problem.

When making investments in stocks, I have learned this truism - go more on downside risk vs. upside risk. No such thing as a riskless investment. If I can get this house for 10-20% below the conservative estimate + a 20% downpayment + sizable EF to me smacks of small downside risk. Who knows tho. . .it could be a moneypit but the word around town is these people were anal about their property.

The furnace may be old but I bet it was serviced.

I'll admit though. . .I am so emotional right now (which is why I am here). . .one week I am just thinking renting, next week. . .now I am lease/purchasing, maybe buying.

**disneysteve** · 11-08-2010, 08:01 AM

Originally posted by Scanner View Post

I hate making major life decisions in a hurry.

I think this is a very important point that might be getting overlooked in this conversation.

You SHOULD NOT be making major life decisions in a hurry or at a time of emotional upheaval like a divorce. Why do you need to buy a house right now? Why not rent for a year and let the dust settle and see where things stand at that point?

I would equate this to someone who experiences the death of a loved one and gets an inheritance. Advisors always recommend parking that money for 6-12 months and dealing with the loss before making any investment decisions. In this case, the "death" was of your marriage and you need to take time to adjust to the changes that brings before making any big decisions. JMHO.

**MonkeyMama** · 11-08-2010, 08:11 AM

Depends, depends, depends. There are circumstances where I would borrow more. Currently, I would borrow less than those calculators - they are aggressive considering our current circumstances. The main circumstance being regional cost of housing (and rents). A close second would just be personal comfort level, which varies due to personal circumstances.

Anyway, I agree with Steve. I would wait a while before buying anything, in your shoes.

**Scanner** · 11-08-2010, 08:15 AM

I know. . .that's what I originally wanted to do but beleive it or not, the rental market is tight here.

A house comes up for rent (I have 3 boys) and the person gets like 20 interested applicants.

I won't deny I am emotional. . .part of it is the terms of the divorce. Essentially, I am bound by the terms to a parenting plan that is 60/40 in parenting time, which means I need a busstop in their home town (the schools allow joint custody busstops). AFter she pays me out, I have 90 days to find a place, which isn't a lot of time and then I assume the final parenting plan.

The apt. complexes are too small for 4 people and often the neighborhoods are questionable with Section 8 housing.

My mind is whirling but I am trying to use my decent investing brain and balancing downside risk with upside reward.

**disneysteve** · 11-08-2010, 08:44 AM

Originally posted by Scanner View Post

The apt. complexes are too small for 4 people

Really? I find that hard to believe. There are no 2 or 3 bedroom apartments? Every kid doesn't need his own room. There is nothing wrong with two kids sharing a room and one kid using the living room for sleeping on a sofa bed. Remember, this is just a temporary situation.

I would never want to feel rushed into a decision as important as buying a house.

**Scanner** · 11-08-2010, 09:18 AM

Yes, there are 2-3 bedroom apartments in the Section 8 housing. . .and I would even consider renting them if I could get a term of the lease for 6 months or less.

Actually, Section 8 housing is very nice I have to say even if the neighborhoods tend to be worse for the kids. I would personally live in Section 8 in NJ; people living there really get a good deal.

Don't you think I could rent it out if 20-30 applicatns are the norm, if it came to that?

**disneysteve** · 11-08-2010, 09:32 AM

Originally posted by Scanner View Post

Yes, there are 2-3 bedroom apartments in the Section 8 housing. . .and I would even consider renting them if I could get a term of the lease for 6 months or less.

Not sure I'd go for section 8 housing myself so I understand the problem there. As always, all real estate is local. If there aren't regular (non-section 8) apartment complexes in your town, that's a problem. It just isn't what I'm used to around here. I'd get my name in with every local realtor I could and let them know I'm looking for a house rental in the neighborhood and hope they can put you at the front of the line when something opens up.

Would you confirm this online calculator for me?