I learned early on one fundamental of buying a home: it’s all about the monthly payment. If you can’t afford the payment, you don’t buy the house. Pretty darned simple math, really.
Truly, the monthly payment is the only guide you should use. Interest rates change, prices of homes go up (and down), economic conditions vary. Focusing on any one or even all of those issues can only obscure the truth of owning a home: every month you have to write a check to pay the mortgage. It doesn’t really matter who is in the White House, what the economic forecast is, where interest rates are or what the value of your home is: ya still have to write that check!
I was reminded of this one fundamental truth of homebuying during this thread over at the Craigslist Housing Forum.
In the many, many, MANY interviews I have had over the years with homebuyers, truly, the monthly payment is what people care about the most.
I’ve developed a method where, once I calculate the payment on my handy-dandy calculator, I recite the total payment (including Principal, Interest, Taxes, and Insurance, or PITI) out loud, then look up for the reaction on people’s faces.
If I see a look of horror, I’m rather concerned about doing the loan for those folks.
This happened a lot during the “fantasy” years of the Sub-Prime boom. Being old-fashioned, I was still quoting 30year fixed rate loans when the entire planet was originating 2/28, I/O ARM loans. Sure, those loans had initial monthly payments that seemed affordable, but, when all was said and done, well, I don’t think I need to describe the consequences—just turn on your news channel, the results are splashed all over it daily.