|
|
|
How Much House Can You Afford
here are several ways to when they actually apply for the
gauge how much you can loan).
afford to spend on a house.
But, before you go house-hunting, At the same time, you must
get pre-qualified for a mortgage understand that pre-qualification
so you'll know in what price is not pre-approval for a loan
range you can shop. It is not either which is a much more
unusual for first-time buyers to involved formalized process that
be somewhat baffled about how to results in an actual letter of
estimate what mortgage payment credit from a lending institution
they will be able to handle each for a specific loan. Depending on
month, plus how much money your unique circumstances, you
they'll need for a down payment may wish to consider pre-approval
and closing costs. as an option, but it is not
necessary-consult with your real
That's why it is a good idea to estate professional to decide
get pre-qualified through a what's right for you.
lender before you even start to
look for a home. The less formal process of
Pre-qualification lets a buyer pre-qualifying on the other hand
know exactly how much a lender is is a tremendous tool for buyers
willing to loan them. With to have when making an offer.
pre-qualification in hand, the Usually, pre-qualified buyers
buyer can save a lot of time-and have an edge when making a
frustration. purchase offer because the seller
knows that the buyer is
Pre-qualification does not pre-qualified, and that there is
obligate buyers to take a loan at least one lender ready to make
from the lender, nor should it it happen.
involve any fees (until later,
In addition, it allows you the payments toward debt
flexibility to choose the reduction-including existing debt
mortgage that is best for you at plus new debt associated with
the time of actual purchase-which buying a home-cannot be more than
is sometimes months down the 30% of they buyer's gross monthly
road. That can be important given income.
the volatility of interest rates.
An important factor that may
When a lender pre-qualifies, they influence a lender to authorize a
are more concerned about the loan with a higher debt-to-income
buyer's paying ability than the ratio - (where debt payments take
price of the property. a higher percentage of a buyer's
income) - is a larger down
For this reason, lenders are payment. Buyers who put a larger
interested in more than just a percentage of the purchase price
buyer's income. They also want to down (5%, 10%, 15%, 20%, etc.)
know how much existing debt a are considered better "risks,"
buyer has, what their on-going because the theory is that the
financial obligations happen to more a person has actually
be, and what the buyer's monthly invested in the purchase, the
budget looks like. less likely they are to default
on the loan.
Lenders use an established
debt-to-income ratio, usually Buyers usually discover that the
between .28 to 1 and .38 to 1, to pre-qualification process will
calculate the amount of the loan produce a home purchase price
they are willing to give to a that is roughly 2 1/2 to 3 times
buyer. For instance, a lender who their gross annual income. The 2
uses a .3 to 1 debt-to-income 1/2 -to-3 guideline is only a
ratio has determined that general rule of thumb, however,
and it doesn't take a buyer's run approximately $1330 per
full financial situation into month. What about taxes? The rate
consideration. Since the lender's will often times vary from
calculations will also consider a city-to-city, but generally you
buyer's actual debts and ongoing might expect your yearly tax bill
expenses, the loan to total around 1.25% of the
pre-qualification amount may be purchase price.That means, for a
higher or lower. home with a market value of
$250,000, yearly taxes might run
Regardless of the price bracket a around $3125. A local real estate
buyer targets, they should keep agent can help prospective
pre-qualification in mind. homeowners refine these figures.
How much should you budget to own In addition, it is important to
your own home? keep in mind that there are many
additional expenses incurred with
Aside from the down payment, the home ownership, some of the most
three largest expenditures obvious are utilities and trash
involved with the purchase of a collection. Smart homeowners
home are usually your monthly should also budget for one other
mortgage payment, insurance and item, maintenance and upkeep of
taxes. Obviously, the amount of the home. If possible, a small
your mortgage payment depends amount should be set aside each
upon your down payment, rate of month to pay for those "rainy
interest and the price of the day" repairs such as painting,
property. plumbing (hot water heaters,
garbage disposals), adding storm
Take, for example, a home that windows (to improve energy
has a $200,000 mortgage. An 7% usage), insulation (in attics),
fixed mortgage for 30 years, will etc.
budgeting and planning.
But home ownership is not just a
one way street-that is, aside How do you go about finding a
from spending money on repairs mortgage?
and maintenance, homeowners can
profit from their property. The The commotion of house hunting is
most significant benefit is the finally over. You found just the
tax deduction. It is no secret right house, and your offer has
that among the last real income been accepted. It was a great
tax deductions available to buy. Now, just one more
consumers today are the interest hurdle-getting a loan-and you're
paid on the home loan, and the home free.
property taxes. This can amount Often, buyers are so eager to get
to thousands of dollars in this "final detail" behind them,
deductions each year. they rush through this portion of
the transaction, and end up with
And, of course, the primary less-than-ideal terms. Borrowers,
benefit of home ownership is however, have something lenders
appreciation-equity that builds want-their business. This
every month. A home, aside from positions them to negotiate the
being a place that provides best possible price (cost of
shelter, can be a profitable loan), terms and service.
investment, and the rising value
of the property oftentimes Let's look at price, or the cost
provides another "savings" of the loan. The first thing to
account. do is find out what the current
rates are, information readily
So, when it comes to buying a new available on the internet, in
home, remember one thing ... the your newspaper or from your real
purchase of a property requires estate agent. When comparing
rates, figure the annual and what you predict will happen
percentage rate (APR), which in loan rates in the years ahead.
includes interest, extra fees and
costs amortized over the life of For example, if you only plan to
the loan. Also determine the reside in the home for a year or
number of points, if any, that two, starting with a lower
the lender will charge to make Adjustable Rate Mortgage (ARM)
the loan. might be the best choice. If you
have no plans to move, and feel
(A point is equal to one percent that inflation will rise rapidly,
of the loan amount.) a fixed rate would obviously be
better.
Next, consider what loan options
the lender offers. There are six Finally, and perhaps most
or seven basic types of loans, importantly, consider speed and
which vary in their duration. service. Buyers shouldn't have to
Check how rates are calculated wait days for approval and weeks
(fixed versus variable), and for closing just because the
whether charges are fully lender is slow.
amortized over the life of the
loan, or whether you'll have to Remember, qualified buyers are
pay points up front and/or great prospects for lenders - so
balloon payments at the end. give your business to the lender
who demonstrates they not only
Is there a prepayment penalty want it, they deserve it.
clause?
To see homes please click below.
Which terms are best for you depends on such factors as what size="-2">http://tinyurl.com/2k8e
changes you expect in your income ac
About the Author:
Buy Real Estate at half the price. http://tinyurl.com/2k8eac
Read more articles by: Tracy Phillips
Article Source: www.iSnare.com |
|
