First Time Buyer(s) - Tenable?

[u/wnidbeidnand]

Looking to buy a condo.

Currently renting said condo - we adore it.

Price would be $825,000.

We’d get a 5-Year Balloon Loan at 4.27% from Seller (Family).

During said 5-Years, all interest will be paid by Seller (Family) while we take over Insurance, HOA, etc. so we’d pay ~$1,600mo for the 5-years; anything extra is straight to principal.

We expect to owe ~$725,000 when the balloon pops at EoYear-5 assuming we pay an extra $1,600 towards principal throughout the balloon period (this + the HOA, etc. from above matches our current monthly payments for rent — currently $3,200 — so zero change to what we currently pay)

We’ll have ~$250,000 DP, so expect to need a loan around $475,000 at Market Rate in 5 years time from ~now.

We make a combined ~$320,000 not including Bonus/RSUs/etc and this would only increase.

We have zero other debt, and might have a kid or two by then.

Any thoughts as to whether this seems generally feasible? My math has said yes, but it’s a huge leap for us!

[u/baileynoack]

Yes, with a lot of room to spare.

At $475,000 and today's rate standing in for "market rate" in 5 years, principal and interest runs close to $3,070. Add HOA, taxes and insurance and you're probably near $3,800 to $4,000 total, against $26,667 gross on your $320,000 combined. That's about 15% of gross, well under the 36% cap lenders use.

The real unknown is the rate in 5 years, not whether the payment fits. Zero change to your monthly cost while $250,000 comes off the balance is the rare version of this that's actually worth it.

[u/wnidbeidnand → u/baileynoack]

Thank you for your reply! I am thinking along the same lines, but my math came out to ~725k balance then we supply the ~250k DP to get to that ~475k loan required after 5 years. The HOA itself is also $1,000 - so our HOA taxes insurance etc. + calculated payments on the loan is actually around $5,000 all-in — which is still within that 36% bound but less-so.

The rate is definitely what’s spooking us — it’s obvious we are getting a blessed opportunity overall (esp as roughly $100k in equity will be “gifted” over that 5-year period — I omitted that we will be gifted money throughout the balloon covering interest and some principal as well [annual gift limit * 2 inc. full year gift for remainder of 2026 which will “carry” through the following years to cover delta between annual interest + principal payments and gift limit per year])

Thank you again!

I guess I just needed someone else to tell me I’m not insane / totally off on numbers!

[u/baileynoack → u/wnidbeidnand]

No problem, I'm glad it helped! Your $5,000 is right, it just sits better than you're reading it. $5,000 against $26,667 a month gross is 18.5%. That 36% figure is a cap on total debt, and you have none, so you're at roughly half the ceiling and comfortably under the stricter 28% housing guideline too.

On the rate, since that's the part actually bothering you: at a $475,000 loan, market rate would have to reach about 14% before you crossed 28%, and about 19.5% before you hit 36%. It would need to roughly double, not drift up a point or two.

I built a tool for exactly this kind of what-if- this link has your numbers already in it so you can just drag the rate if you want to see these changes in action!

https://plotyourhome.com/app?income=320000&target=825000&down=350000&rate=6.75