Estimate the affordable mortgage and the affordable purchase price for the Bergholts? Please help if you can.

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Kim and Dan Bergholt are both government workers. They are considering purchasing a home in the Washington D.C. area for about $ 280,000. They estimate monthly expenses for utilities at $ 220, maintenance at $ 100, property taxes at $ 380, and home insurance payments at $ 50. Their only debt consists of car loans requiring a monthly payment of $ 350.

Kim’s gross income is $ 55,000/year and Dan’s is $ 38,000/year. They have saved about $ 60,000 in a money market fund on which they earned $ 5,840 last year. They plan to use most of this for a 20% down payment and closing costs. A lender is offering 30-year variable rate loans with an initial interest rate of 8% given a 20% down payment and closing costs equal to $ 1,000 plus 3 points. Before making a purchase offer and applying for this loan, they would like to have some idea whether they might qualify.

  1. Reply
    Rickie M
    February 10, 2011 at 9:38 pm

    Try going to this site, they have lots of information about this sort of stuff.

  2. Reply
    February 10, 2011 at 9:55 pm

    Thank you for setting out the parameters so well here. There are a few things that I would need to know to know if a better option is available to them.

    Given what you’ve put here, the family you’re talking about should be able to see a better loan (fixed rate for example) and lower loan costs (fewer points to pay) from most lenders or brokers. A lot depends on their credit histories. Since they only have 1 item of debt, one concern would be if they have enough trade lines (sources of credit available to them right now) to qualify. Most lenders require 3. If they have open credit cards that carry no balance, that works great.

    If all things that aren’t mentioned here are as well planned as the items you have listed, they should qualify quite easily and for better terms.

  3. Reply
    February 10, 2011 at 10:16 pm

    Well you forgot one of the most important pieces of information. What is their FICO?

    This is not the place to shop for loans anyway. I don’t do loans in that area or I’d offer my services but I suggest you/they speak with a qualified broker.

    What you gave me sounds high,, especially for A paper. Even with marginal credit and 20% down I suspect you could get a 30 year fixed (conforming) much better than that. If you want more details feel free to contact me. Again, I don’t do business in that area but I’d be happy to offer some free words of advice.

    Not quoting rates or anything but I have a suspicion that even with an average FICO (let’s say 680) you/they could get a conforming 30 yr fixed at 6.25 with no Prepay, no hidden ysp on the back end, and zero points. Make sure you shop around.

  4. Reply
    February 10, 2011 at 11:00 pm
  5. Reply
    February 10, 2011 at 11:15 pm

    Check your local banks to see what types of mortgages they offer. most banks will not charge an origination fee and some have programs where there are reduced closing costs to the buyer.

  6. Reply
    February 11, 2011 at 12:03 am

    The points charged on this loan APPEAR to be high. based on the information supplied you have several other options if the borrower has limited credit or some items that have lowered the scores. With 20% down, the borrowers should be able to get a better rate (fixed preferably)

    If you want a competitive quote, drop me an e-mail.

    But as for advice, have them shop around. As long as they have all lenders review the credit profile with 2 weeks of each other, it will not lower the credit score for pull. They may be able to go FHA (provided credit qualifies and the property qualifies) There are also other conforming loan programs as well as Alt A products they may qualify for that lowers the costs of the loan and the rate.

    Hope this helps

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