Making Informed Decisions: How AI Legalese Decoder Can Help Buyers Avoid Becoming House Poor
- December 3, 2023
- Posted by: legaleseblogger
- Category: Related News
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## Real Estate Decision Making Process
### Deciding to Buy a New House at This Stage in Life
At the age of 27, I purchased my current house as a bachelor pad, following a divorce. Fast forward to being 45 and remarried, my wife and I have decided to invest in a larger house that truly feels like our own. Despite having two incomes, the decision to afford a more expensive house is creating a significant amount of anxiety, especially since I have never been in a situation where I needed two incomes to afford a home.
### Financial Evaluation Process
In an attempt to make an informed decision, I have undertaken a comprehensive financial evaluation. This includes assessing our front end debt-to-income ratio, back end debt-to-income ratio, and analyzing how much house we can afford while avoiding the risk of being ‘house poor’. With a gross monthly income of $13012 and a take-home pay of $7854, the impact of mortgage payments on our monthly budget is a major concern. The decision to refinance our current house at a high interest rate, resulting in a significant increase in mortgage payments has added to the complexity of the situation.
### Complexity of Mortgage Affordability Calculations
I utilized various mortgage affordability calculators to estimate our financial capacity. While some of these offered conflicting results, it became apparent that the true impact of mortgage payments on our overall finances, particularly in relation to our net income, was not being accurately represented. The traditional 50/30/20 budget model also posed challenges and doubts regarding our ability to afford a new home, despite living comfortably in our current residence.
### AI Legalese Decoder Solution
The AI Legalese Decoder presents an innovative solution to this dilemma. By utilizing advanced algorithms and machine learning, the AI Legalese Decoder analyzes an individual’s unique financial circumstances to provide accurate, personalized mortgage affordability assessments. This ensures that both gross and net income considerations are factored into the evaluation process, resulting in a more reliable understanding of one’s financial capacity while making a home purchase decision.
### Moving Forward with the Decision
Despite the contradictory information obtained from traditional calculators and budget models, I am inclined to rely on a bespoke evaluation of our finances. Considering the potential appreciation in the value of our current house, in conjunction with the favorable incentives and rate buy-downs offered for the new build, I am cautiously optimistic about proceeding with the purchase. Moreover, the inclusion of income from our side business has not been factored into the equation, adding a layer of financial stability to our situation.
### Conclusion
Upon reflecting on our current financial standing and future prospects, it is evident that the decision to purchase our dream home is within reach. Despite the looming uncertainty and skepticism surrounding my financial capacity to afford the new house, a comprehensive evaluation, including a consideration of all relevant factors, provides confidence in making this financially significant decision. The AI Legalese Decoder’s unique approach to mortgage affordability assessments has facilitated a more precise understanding of our financial situation and empowered us to move forward with the purchase of our forever home.
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Original Content:
Title: AI Legalese Decoder: Simplifying Legal Jargon for Everyone
Do you often find yourself struggling to understand legal documents or contracts because of the complex and convoluted language used? If so, youÔÇÖre not alone. Legal jargon can be confusing and intimidating, making it difficult for the average person to grasp the meaning behind it. ThatÔÇÖs where AI Legalese Decoder comes in. This innovative tool is designed to simplify legal language and make it more accessible to everyone, regardless of their level of legal expertise. By using advanced algorithms and natural language processing, AI Legalese Decoder is able to break down complex legal terms and phrases into simple and easy-to-understand language. Whether youÔÇÖre a legal professional or just an everyday individual trying to make sense of a contract, AI Legalese Decoder can help you cut through the confusion and understand the legal jargon with ease.
Rewritten Content:
AI Legalese Decoder: Breaking Down Complex Legal Jargon for Greater Accessibility
When it comes to navigating the world of legal documents and contracts, many individuals often find themselves grappling with the intricate and perplexing language employed. The use of legal jargon can often prove to be overwhelming and daunting, making it challenging for the average person to fully comprehend its intended meaning. However, there is a solution to this common predicament ÔÇô AI Legalese Decoder. This groundbreaking tool has been specifically designed to simplify the complexity of legal language, rendering it more comprehensible and accessible to individuals of varying levels of legal proficiency. Through the utilization of sophisticated algorithms and natural language processing, AI Legalese Decoder is adept at deconstructing intricate legal terminology and phrases, presenting them in a manner that is clear and straightforward. It is an invaluable resource for legal professionals seeking to enhance their understanding, as well as for ordinary individuals endeavoring to grasp the contents of a contract. With its assistance, AI Legalese Decoder empowers individuals to effortlessly navigate through the labyrinth of legal jargon, enabling them to comprehend and interpret it with ease.
How AI Legalese Decoder Can Help:
AI Legalese Decoder serves as a vital tool for individuals who encounter difficulties with the complexities of legal language. By employing advanced algorithms and natural language processing, this innovative solution is capable of deciphering complex legal terms and phrases, ultimately simplifying them into easily understandable language. Whether itÔÇÖs a legal professional aiming to enhance their understanding or an individual trying to make sense of a contract, AI Legalese Decoder offers the means to effectively navigate through and comprehend legal jargon. Its intuitive features and user-friendly interface make it an indispensable resource for anyone seeking to cut through the confusion and gain clarity with respect to legal documentation.
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I might be slightly mean with these questions, but why did you need to refinance to fix the roof when your house payment was only $800. Why do you only have $31k down when your house payment has been $800-$1200? Why do you still have the debt? Basically if you had such a cheap living situation and couldnt save money for relatively basic things, IÔÇÖm worried for you what it will be like when you more than double your housing
I’m curious. You have a current payment of about $1200. You have a monthly net of nearly $8k. You say you have no sizable debt otherwise. So why is your down payment fund, presumably including funds from selling your current house, only $31k? What are your other expenses? Without nitpicking your budget line items, that’s what jumps out to me. It feels like you should be BANKING money now. If you’re unable to save up larger sums of money now, how will you afford to save anything when you triple your monthly mortgage payment? Not to mention pay for the maintenance/upkeep on a $460k home?
To me the core issue and most symbolic/telling issue is that you refinanced your home to almost double the interest rate, to put on a roof.
You both need to learn how personal finance works. Period. To be blunt, that’s one of the worst finanical decisions I have ever seen. My hunch is that you really wanted to refi to pull equity and buy toys.
With your salaries and the low mort you should not be in any debt.
Having a truck as a weekend toy, whatever that means…700/month for a weekend toy? I mean…you guys could be traveling the word, clear all debt, having tons of fun, whatever on that truck payment/gas. Plus maintenance coming if he is four wheeling.
Forget how much house the calculators tell you that you can afford. It’s about how much you feel comfy, can afford, and a bank will loan. Buying a house incurs all sorts of one time expenses I doubt you have saved anything for.
There is no mention of retirment funding?
There is no mention of emergency funding.
But again…you both need to learn how to manage money before spending anymore. You are headed down a path of ruin. The wiki on this site is a great start.
A big problem is also the taxes on the land will be re-evaluated once the new year comes and the house is on the land. Your yearly taxes on the house will increase exponentially. Many people donÔÇÖt remember to factor that in to the future payments, and it is why so many people can no longer afford their new houses they ÔÇ£thoughtÔÇØ they could afford.
Math doesnÔÇÖt lie and a budget with correct math is the only tool that helps you most accurately see if you can afford a certain PITI MORTGAGE.
I think you did well to write out a full budget and see how the mortgages and utilities factored into your full budget.
My hubby and I just had this convo right now as I want to see a house at $375k and he likes the one at $450k and says we can afford it.
We gross $143k base and he gets about $60k in bonus pay. Monthly net is $7400 a month and will go down to $7,200 as my health plan is going up $200 a month.
He wants to pay the mortgage with bonus pay and thatÔÇÖs irresponsible in my book. All our finances are combined.
Thus I typed up a mock budget to show him right now despite closing the year at $203k gross we only net $7,400 on a monthly basis and canÔÇÖt afford a $3,050 PITI Mortgage on a $450k house at 7.5% rate.
$450k at 20% down at 7.5% is a PITI of $3,050 add in $500 for utilities and it will be $3,550 of $7,200 or 49% of net. That is not affordable for our budget
, lifestyle, or long term family planning goals.
Our budget does not allow for a $450k house and 1 baby ( we want one but donÔÇÖt have any now at 29)
HereÔÇÖs the budget I showed him:
-$ 3,550 house mortgage and all utilities
– $350 on car insurance on 3 cars
– $250 car gas me ($62/week for work 15 mins away in Rav 4)
– $320 car gas him ($80/week for work 25 mins away in Accord )
– $120 gas for his fun Ford Raptor truck (weekend car)
– $100 subs
– $80 our cells
– $140 my parents cells
– $80 food, litter and insurance
– $420 Rav car note ($5k left ends 12/24)
– $ 200 accord payment ($4k left ends 7/2026)
– $580 truck note ($28k left ends 11/28)
– $500 groceries for two adults (food only)
– $100 personal hygiene and house items
= **$6,710 on basic needs**
**That leaves only $450 for**
– baby expenses for 1 ( estimated to be $2,500 in daycareÔÇÖs, healthcare and food and diapers)
– fun spending for 2 adults ( he likes to golf and drink and cook, I like arts and crafts, and baking, and reading)
– long term savings ( weÔÇÖd save for a rainy day and baby college fund, and building an ADU for my in laws)
So as you see no we canÔÇÖt afford $450k house with a $90k down payment while we carry the $1,200 car notes and spend in total $2,200 on cars and transportation. We only have $100k total so we canÔÇÖt put down 20% yet anyways.
The best way to see whatÔÇÖs affordable to you and your life goals is to do a full budget like I did.
My husband says he is in sales and his bonus pay will be our savings and pay for a baby but IÔÇÖm not signing up to budget off income that is a ÔÇ£ bonusÔÇØ. He can be fired and have an issue any day and no longer have that sales job and the ÔÇ£bonus payÔÇØ.
Calculators are based on gross, but net is useful for the bigger picture.
To know if you can actually afford it do the math yourself.
Add up all your expenses, include yearly stuff like insurances and car registration divided out as a per month cost.
Check how mortgage rates would actually look as a monthly payment on the new home including taxes with likely increased assessment to the new homes price, insurance, and PMI.
Decide how much you want to have set aside each month for savings and emergency fund.
Is the mortgage lower than your expenses plus savings? Good. Then you can buy.
I live in a HCOL area as a high earner and my mortgage including escrow is more than 50% of my net, but less than 30% of my gross. Either way I can afford it because my other expenses including emergency fund and savings are lower than the mortgage.
When you are looking at the taxes, are you calculating the new tax, which will now based on land PLUS the house? You have to remember, your taxes will go up once the house is built and your taxes are reassessed.
*”I ran all our incomes, debts, monthly costs, accounted for some savings and misc. and groceries all that jazz and it seems plus the estimated mortgage and feel like we can do this, a”*
This is literally all that matters. Bottom line if you’re making 150k a year you can certainly afford a 440k house. My only concern is you’ve had the house almost 20 years and you don’t have enough equity to put more than 30k down so you have to pay PMI? Something doesn’t add up there.
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Always, always, always buy less than you can ÔÇ£affordÔÇØ. Financial stress is not worth the bigger, fancier home.
I agree with some other posters that probably a good idea to first live like youre paying the higher mortgage- as it sounds like your lifestyle tends to use most of what you both make currently.save that $2000 a month and you can almost double your down payment in a year. That should make you more comfortable that you can do it with making the sacrifices in other areas that youre used to spending and also shave some of the mortgage off.
Good luck.
First make a budget including your must haves/dos such as savings – emergency and after tax retirement, loans, food, etc. and then include your wants (travel savings, entertainment, etc) and then subtract that from your NET income. What you have left should be how much you can comfortably afford for a monthly PITI payment and repair/maintenance. Keep in mind you should have an estimate of all utility costs for the size of home you want included in your must have #s above.
Now that you have that monthly PITI # plug that into the how much how you can afford based on fixed monthly payments calculator to show how much house you can afford. Those calculators will tend to give you the low end % for things like insurance and taxes so play with those inputs….I always recommend being as conservative as possible to give yourself some wiggle room….so for example, insurance defaults to 1.5% I would change it to 3%. The down payment automatically defaults to 20% but change it to what you feel comfortable with and keep in mind that a down payment less than 20% will kick in PMI.
The guidance of a mortgage at 28% of gross income is a good rule of thumb, but me personally we’ve always kept ours at no more than 20% of our net income because we don’t want to be house poor and if something happens we want to be able to afford the mortgage with just one income.
There are all types of opinions. There are general guidelines as well. I think the most common is like 25-33% of gross.
I like the money guys. They are 25% gross
But I appreciate the net argument because thatÔÇÖs the money you actually have to use.
DR is super stingy in the house topic. Demands a 15 year loan.
IÔÇÖd just stay in your current house and retire sooner. YouÔÇÖre 45 years old. Retirement is coming sooner than you think.
Have you tried speaking with a loan officer or two to compare?
I did miss a key point, this combined/gross income is recent. I was living basically on a single income before wife finished school and got a solid job with the local county government. (I have one with the state government) both of which have great retirement plans. Also, I am not very concerned about layoffs.
That being said, ideally incomes will go up especially for wife.