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The Condo Mania Team

News > How Much Can I Afford to Pay for a Tempe Condo?

Tired of those yearly rent increases your landlord forces on you?  As rental vacancies stay low across the Tempe and Southeast Valley area, monthly rents will continue to climb.  Stable monthly payments is one reason that moves people into considering their first condo purchase.  When you get a fixed rate mortgage, your monthly payments stay relatively stable (except for an occasional HOA fee increase). 

But it's important to make sure you're not over-stretching a monthly payment that would cause you to be "house poor".  That's why many lenders have a requirement that mortgage payments not be more than 28% of your monthly pretax income.  This is also known as a front end Debt-To-Income Ratio. Here's an example using a $50,000 income:

Yearly income:  $50,000

Monthly Income ($50,000/12) :  $4166

28% of your monthly income:  $1166


Ok, so now you have that bottom line for how much you can pay every month.  Now, how to figure out how much your payment will be.  You can find a mortgage calculator online (there are on almost every mortgage website) and enter in the values to determine what price point you need to consider.  Or you can also look at some listings on the Tempe Condo Mania website, which include sample mortgage payments.  Here's an example for a 2 bedroom at Signature Place condos in Tempe

Price: $169,900

Monthly mortgage payment (shown in each listing):  $669

Taxes (shown in each listing): $94

Monthly HOA (shown in each listing): $151

Total payment:  $914

Ooh, this looks good.  You're coming up well below the 28% number, which will definitely help your monthly budget. 

One Little Sticking Point

The calculations shown above and on Tempe Condo Mania are for a 20% down payment (the amount of cash you need to contribute at closing towards the purchase).  Most first time buyers have trouble coming up with this optimal amount, so in return for a smaller downpayment, many lenders allow a 10%, 5% and 3% downpayment.  However, the tradeoff for a smaller downpayment is that you'll probably have to pay "mortgage insurance" (also known as MI or PMI).   Here's how the Signature Place purchase may look with a 10% downpayment ($16,990):

Monthly Mortgage Payment: $752

Taxes: $94

Monthly HOA : $151

Monthly MI: $75

Total Payment:  $1072

We're still slightly below our 28% limit, even with a 10% downpayment. 

Wait, you say, this is Getting Close to my Rent Payment!

With condo prices going up in Tempe and the rest of the east valley, you may see rent payments similar to what monthly mortgage payments.  Does it still make sense to buy?  You don't want to overpay and that's why it's a good idea to speak to a tempe condo real estate agent to help. 

But here is one reason to move forward with a condo purchase, even if rents are similar to monthly mortgage payments.  EQUITY.    Part of your monthly payment is paying back your mortgage.  In our example with a 10% down purchase at Signature Place,  $2570 will be applied toward your loan amount in the first year alone, and every year that number gets bigger.  This is how homeowners gain wealth.   Rent is going in the pockets of your landlord.

Buying Isn't for Everyone

In order to buy your first condo or home, you'll want to have income security, manageable debt and a decent credit score.  Need help getting started?  Contact us for some advice!





Though not guaranteed, information and statistics in this article have been acquired from sources believed to be reliable.

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Logo for Fair Housing ActThe Fair Housing Act prohibits discrimination in housing based on color, race, religion, national origin, sex, familial status, or disability.

Information Deemed Reliable But Not Guaranteed. The information being provided is for consumer's personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. This information, including square footage, while not guaranteed, has been acquired from sources believed to be reliable.

Last Updated: 2024-05-30 04:36:47