It won't work. Not if he has to finance 320k.Friend who grosses 48k wants to buy a $320,000 home. He is coming out of a divorce and might have 60k to put down on the home. He has two kids with joint custody about 10k in lawyer bills and $300 car payment.
Is it possible?
i don't see it working.
Quick math:
$48,000 figuring 12% in taxes leaves ~$42,240 to spend for the year and about $3520 per month
If he has outstanding credit he's looking at about 4.5% interest and ~$190/$1000 financed. Paying off the attorney fees and keeping 10k in the bank for emergency he is financing $280000. This ends up to be about $1418/month in principal and interest only. Add in property tax, insurance, and pmi brings it to about $1900/month. So he's looking at :
$3520
- $300
- $1900
= $1320
This will need to pay for food, gas, utilities, cell phone, cable, child support, savings, vacation, car or house repairs, etc...
Ignoring the Dave Ramsey silliness, lenders will give the best rates if you keep your recurring monthly payments under 29% of your gross income. They will let you go up to the 40% range but you're more risky at that point and will pay more.
As others have said, not really a good idea even if someone will lend it to him. He should be looking in the $150 - $200k max range for housing or saving up a bigger down payment.
Dave Ramsey silliness? Do tell YOUR system for financial independence?
Dave Ramsey silliness? Do tell YOUR system for financial independence?
I was in a house this weekend that was a “fixer upper” at $670000. The owner, put another $200K into the remodel, and still has another $30-50K to go. It was actually a GREAT investment, as it’s already appraised at $1.2M and he’s had cash offers to buy with the work not done for that price.Even if I was a millionaire I wouldn’t drop 320k on a house. I can understand wanting to keep it but why put yourself in that position? That is a high risk loan for your friend and the bank.
I know this member. He is doing pretty well for himself.
Good investments are out there. Anytime you can make money off your money while you are sleeping, it's a good thingI was in a house this weekend that was a “fixer upper” at $670000. The owner, put another $200K into the remodel, and still has another $30-50K to go. It was actually a GREAT investment, as it’s already appraised at $1.2M and he’s had cash offers to buy with the work not done for that price.