1000 / 12 = 83.34
Mortgage = 456
Could someone actually buy a house without knowing what their payment would be when taxes and insurance were added in? Crikey, I couldn't really get a mortgage for under a Grand a month where I live, and that's before taxes and fees. Good cautionary tale though. The prevailing wisdom is that it's always better to own than rent, but it's not always true.
I wonder if:
1. they did not make out better by owning rather than renting because I bet they never paid some months. Owning is better than renting if you plan not to pay. You will be evicted sooner if you are a renter.
2. like you say they could have actually purchased without a reasonable estimate of what their monthly payments would be. I have done 3 purchases in the 11 or 12 years and I had a "good faith" estimate each time.
3. how someone can even rent for less than this mortgage payment? I know you would be hard pressed to rent a decent place for that here.
How could someone not know that there will be taxes and insurance? When we got our mortgage, it was thoroughly discussed with us what the taxes would be, and that we needed insurance. I shopped for insurance and notified the lender before closing of what company we had selected. We were given the option of having the taxes and insurance amounts included in the mortgage amount, placed in escrow and paid by the mortgage company or paying them ourselves. How could you not know?
I don't see how she could have left the settlement table without knowing it. If fact, lenders are supposed to give you all of that information before you even go to settlement.
It sounds to me like it was just poor money management on her part, and now she is trying to play dumb or blame someone else (I bet it's Bush's fault!).
It is true that some lenders and real estate agents are too "liberal" in telling people, especially first time buyers, what they can afford. They have no stake in anything after the sale, and everything to gain by pushing the buyer to a higher home price/loan.
I remember when I bought my first house, they told me I could buy a house for up to $150,000. Sure, I probably could have, but only if I ate bread and water, drove to and from work and went no where else, and used cardboard boxes for furniture! I ended up buying a house for $99K because it was crazy to think I could possibly afford to live in a $150K house at that time.
I have some young relatives who just bought a house for probably more than they should have spent (but they insisted on a single house instead of townhouse as a starter home). But I also know that they have now maxed out a few credit cards buying stuff for the house. They'll be in the hole for years.
Then they face the prospect of ever rising property taxes around here, which I'm sure they are not planning for.
It's Pittsburgh. If it ain't fishin, fightin or another in, you got to draw em a picture.
Something else to consider is that taxes and insurance will always trend upwards... Don't expect them to stay the same over the term of the mortgage. Over the last 10 years, my mortgage payments have increased by almost $180 a month, due to insurance rate and tax increases. Of course, in my case, I made sure to buy a house that I could really afford, one that cost about 1/2 of what the realator told me I could "afford." I wanted to be sure I could get some furniture, and still be able to pay my bills.
Mark