Blog

How much house can you afford?

KarenThis is a question every first time homebuyer needs to ask themselves. There are many home affordability calculators on the web. Any of them can be used to input your income, monthly debt payments, property taxes and insurance, the interest rate you expect to pay and the loan term.

Your mortgage lender will mention a couple of ratios that are very important in the loan approval process. The front-end debt ratio is commonly known as the mortgage-to-income ratio. The front-end ratio is figured by dividing your monthly housing expense by your monthly income. Staying within standard limits help you avoid taking on too much debt. The standard maximum front-end limit used by conventional lenders is 28 percent. When you apply for a new loan with a standard 20-percent down payment, the lender generally approves you for a request that does not exceed this limit. The FHA, which offers government-backed loans with 3.5-percent down payments and less restrictive credit requirements, uses a 29-percent front-end maximum.

The back-end ratio is commonly known as your debt-to-income ratio. This is a broader look at your current debt position and your ability to take on home loan debt. Car loans, personal loans and credit card debt payments are added to your projected mortgage to figure out how much new debt you can afford. It’s your total monthly debt expense divided by your gross monthly income. The standard maximum limits with the back-end ratio are 36 percent on conventional loans and 41 percent on FHA loans.

Now you know how much you can afford, so give me a call today. I would love to assist……

 

– karen

Does every house need to be inspected by a professional before closing?

KarenAbsolutely! It doesn’t matter if you’re buying a 150-year-old historic home or a new build; you’ll want to pay for a professional home inspection. In fact, make your offer contingent upon the results of the inspection. That way you can negotiate any needed repairs or, if need be, walk away from the sale.

A typical inspection will look at all of these:

  • HVAC system
  • Indoor plumbing
  • Electrical system
  • Roofing
  • Attic and visible insulation
  • Walls, ceilings, floors, windows and doors
  • Basement
  • Foundation and structural components

You may have to get separate inspections for wells, septic systems and termites. A home inspection will cost anywhere from $175-$500 depending on the type of inspection, square footage, or if a wind mitigation inspection will be completed; but it sure beats making a mistake that could cost you thousands of dollars.

So, don’t forget the inspection or you could end up with a money pit that sucks all your cash out of your wallet.

 

– karen

So you think you’re ready to buy that house?

KarenWhat’s big, has four walls and has the potential to push you into financial ruin? Why, yes, it’s a house. The median price of a home in the U.S. in 2014 is $208,300. Depending on where you live, that might buy you anything from a tiny apartment to a modest home; whatever it buys, we’re talking about a sizable amount of money. You definitely want to know the ins and outs of the home buying process before you make a mistake on what could be the biggest purchase of our life.

Exciting times….Who do you call first when you ready to buy? Step one is to vet the local real estate agents, right? Ah, no…Way before you start checking out real estate agents you need to check out your credit score. The three major credit bureaus are Experian, Equifax and TransUnion. You are legally entitled to one free credit report a year. Log on to annualcreditreport.com for your free report. Keep in mind this will only include your report, it will not contain an actual score. If you chose to pay for your credit score be sure to note whether you are being required to pay for credit monitoring service as well. This can add unnecessary costs.

Your credit score will drive what type of mortgage, what interest rate, and what loan term you will qualify for. A one point increase in your interest rate can mean you end up paying an additional 10% on your monthly payment, not to mention thousands more in interest over the life of the loan.

Now that you know your credit score call me to help find your dream home…..

 

– karen