Buyer Resources - Articles

BUYING YOUR HOME - WHAT YOU CAN AFFORD

Do all the research you want - but a good agent will require that you get pre-qualified, or pre-approved for a mortgage before showing you a home! Most Sellers will not accept your offer without proof you are a qualified buyer! 

Pick an experienced and caring real estate agent - it matters!

Many agents charge hundreds in add-on fees to the buyer, on top of the commission they receive from your business! That wasted $295 to $750 could pay for your inspection or appraisal.

How much will I spend on maintenance expenses?
Experts generally agree that you can plan on annually spend 1 percent of the purchase price of your house on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of home ownership. Newer homes will cost less to maintain than older homes. It also depends on how well the house has been maintained over the years. Don't forget to investigate approximate insurance costs. Example: An older home might cost you an extra $85 or more each month. If you purchased a newer home, you could use that $85 towards a higher mortgage payment. Don't forget to see if flood insurance is required. 

What is the standard debt-to-income ratio?
A standard ratio used by lenders limits the mortgage payment to 28 percent of the borrower's gross income and the mortgage payment, combined with all other debts, to 36 percent of the total. The fact that some loan applicants are accustomed to spending 40 percent of their monthly income on rent -- and still promptly make the payment each time -- has prompted some lenders to broaden their acceptable mortgage payment amount when considered as a percentage of the applicant's income. Other real estate experts tell borrowers facing rejection to compensate for negative factors by saving up a larger down payment. Mortgage loans requiring little or no outside documentation often can be obtained with down payments of 25 percent or more of the purchase price.

What can I afford?
Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don't want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts.  Loan programs change - It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and prequalify you for a loan. The price you can afford to pay for a home will depend on several factors: 
1. gross income
2. the amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
3. your outstanding debts 
4. your credit history 
5. the type of mortgage you select (conventional or FHA/VA)
6. current interest rates - rates are still low, but they have gone up.

Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (or PITI as it is known). If you must pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI. This ratio should fall between 28 to 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range.

Why should I buy?
Here are some frequently cited reasons for buying a house:
* You need a tax break. The mortgage interest deduction can make home ownership very appealing. How much in rent have you paid already? 
* You are not counting on price appreciation in the short term. 
* You can afford the monthly payments. A 30-year fixed rate mortgage will help you keep your expenses known. Rent is likely to go up every year. 
* You plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 10 percent of the sales price. 
* Stability: You don't want to be at the mercy of the owner with rent increases or having to move. You prefer to be an owner rather than a renter. 
* You can handle the maintenance expenses and headaches. 
* You are looking for a home - not just a place to live. You are taking the long-term view, and not greatly concerned by dips in home values.

Where do I get information on current market conditions?
A real estate agent is a good source for finding out the status of the local housing market. Buying a home is a huge investment, and a big life event. Any agent or lender can help, but a good and caring agent and a good lender working together will go the extra mile for you.     

Can I buy a home without 20% down?
Many people can afford the monthly costs of owning a home. Their income qualifies them for a mortgage. One
of the biggest fears, is not having enough saved up for the purchase. Lenders have recently been expanding the availability of low-down-payment loans to help more people nationwide qualify for a mortgage. Being able to afford good housing affects everyone.

College and retirement.  One of the biggest fears, is not having enough saved up for the purchase – or believing you don’t have enough money saved. Lenders have recently been expanding the availability of low-down-payment loans to help more people nationwide qualify for a mortgage. Being able to afford good housing affects everyone. Although youngsters entering college for the first time may seem a world apart from the average elderly citizen, these two groups have a very important common trait; the need for adequate housing. For many years young people have rented the absolute cheapest place possible to save on expenses that were devoted to college expenses. At the same time, many older people find themselves in need of downsizing their home or even selling their beloved property to devote more funds to basic living costs and medical bills at a time when their income has been drastically reduced. Thankfully, there are mortgage programs that can assist both groups. Here is an example of just one of the programs that are out there.

Family Opportunity Mortgage

This program offers qualified people a chance to buy a home for either their children that are in college or their elderly relatives without the requirement to live in the home themselves. Since many families are often scattered many miles away this provides an alternative to renting and gives the purchaser of the property an asset that can be later sold when their needs change.

Qualifications for College Students Here are the basic criteria for people who wish to buy a home for their college student. Although youngsters entering college for the first time may seem a world apart from the average elderly citizen, these two groups have a very important common trait; the need for adequate housing. For many years young people have rented the absolute cheapest place possible to save on expenses that were devoted to college expenses. At the same time, many older people find themselves in need of downsizing their home or even selling their beloved property to devote more funds to basic living costs and medical bills at a time when their income has been drastically reduced.

Basic Qualifications for College Students

The student will need to provide adequate documentation showing their enrollment in college

The student must live in the home as their primary residence for at least one year.

The home will need to be within a reasonable distance to the college or university.

The home must be far enough away from the parent’s current home to be considered a second home

The parents are not allowed to own any other vacation homes or second properties within the same area.

The parent(s) are the only ones considered for the mortgage. The child will not be part of the loan.

Qualifications for Elderly Parents

These are the basic requirements for adults wishing to purchase a home for their elderly parents.

The elderly parents must either be in a situation where their income is not sufficient to be approved for a mortgage or they do not have the ability to work.

The elderly parents must live in the home as their main residence.

Unlike the qualifications for college students there is no requirement of distance between the home of the elderly parent(s) and the home of the adult child.

The elderly parents can be a co-borrower on the mortgage, but it is not necessary. The adult child will be the primary focus of the mortgage application.

The adult child may own a primary residence in addition to applying for the home of their elderly parent.

The Family Opportunity mortgage can also be used by parents who wish to purchase a property for their disabled child. The qualifications are identical to the guidelines used for buying a home for an elderly parent.

For parents who have the financial resources to purchase a home for their college bound child or their senior aged parents this is a wonderful Freddie Mac program that allows people to invest in a real estate asset instead of pouring money away in a rental agreement.

How long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. Some lenders will consider an borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.

Buying a foreclosure.
Buyers considering a foreclosure property should obtain as much information as possible before making an offer. These homes can sell below market value - but just because it is a foreclosure does not guarantee it is a great deal. You might not have access to the property prior to making an offer. Homes in poor condition, or those not offering access, typically sell to investors buying the property for cash. There are programs out there to purchase homes needing work. Once again, talk to your agent and your lender about what will be required to purchase properties that need work. Just because you are qualified to buy a home in a certain price range does not mean the house you like will be lender approved.

STOP DREAMING AND START DOING! GET PRE-QUALIFIED TODAY! 

 

Mortgage 1

Tracy VanLandschoot | Branch Manager/Sr. Loan Originator

Mortgage 1 | Cape Coral Branch
3501 Del Prado Blvd. 
| Suite 207 | Cape Coral, FL 33904
tel (239) 471-3696 x 180 
| mobile (239) 462-5900

website | credit | APPLY NOW | facebook | vCard | map | email

Servicing the Community for Over Two Decades

NMLS: #371904 | Company NMLS #129386

The information contained in this email and any attachments is intended only for the personal and confidential use of the designated recipient. If you receive this in error, please notify us by return e-mail, and then disregard and delete this message, as any further distribution or other use is strictly prohibited. Thank you for your cooperation. FOR INTENDED RECIPIENTS: Mortgage 1 ("the Company") maintains policies and procedures designed to protect the integrity and security of consumer and customer information. Because emails can be compromised, please do NOT email documents or information to the Company that contain any non-public personal information such as Social Security numbers, bank account or driver's license information, or other personally identifiable financial data. The Company is a national mortgage servicer and accepts payments from consumers. We are required to be licensed as a debt collection company. All of the Company's licenses can be reviewed at mortgageone.com/license-numbers. NMLS #129386. Thank you for considering Mortgage 1 for your mortgage financing needs.