You may be wondering what you can manage to pay each month for a house payment. Your debt ratio can give provide that information to you. You want to make sure that you are purchasing a home in the price range that will keep your house payment in your affordability comfort zone.
The definition of total debt ratio, from a homeowner’s perspective is the following: your total monthly debt service plus total monthly housing expense divided by your monthly gross income.
The items that are used to determine your debt service are the following:
Monthly car payments
Monthly credit card minimum payments
Monthly installment loan payments
Monthly student loan payments
Monthly child support and/or alimony payments
Also, if you have purchased something “12 months same-as-cash” and that agreement doesn’t require a minimum monthly payment, your mortgage consultant will take 5% of the remaining balance and use that as the minimum monthly payment as required by current underwriting guidelines.
Your total monthly housing expense is comprised of the following:
Principal and interest payment
Private mortgage insurance (if applicable)
Property taxes
Homeowners insurance
Condo/Homeowners association fees (if applicable)
Most loan parameters are calling for total debt ratios under 45%. This means that if you make $3,000 per month gross income, you can qualify for a loan with total monthly debts of $1,350.
Let’s look at an example:
A prospective homeowner makes $3,000 gross income per month. They have a $250 per month car payment and 2 monthly credit card payments of $50 each. That means that they have $350 in debt service monthly. To stay at or below a 45% debt ratio, they would need to keep their monthly housing expense (in total) at $1,000 or less.
Your mortgage consultant will also calculate your housing ratio, which is your total monthly housing expense divided by your monthly gross income. In the example above, the prospective homeowner’s housing ratio would be 33%.
Some loan programs are more restrictive about the maximum allowable limits for your housing ratio. Your mortgage consultant will guide you through the calculations, so that you know exactly what your debt ratio will be in each possible loan scenario and price point.
You will also want to look at your monthly net income (the amount you actually see in your checking account!) and consider your other monthly bills and expenses, such as insurance(s), utility bills, food, entertainment, education, etc, along with your current monthly debt service, and make sure that your prospective monthly housing expense fits into your monthly budget. You don’t want to end up “house poor”!
Calculating your debt ratio is a crucial first step in determining what price point you will qualify for in regards to your home purchase. Please contact me to help you analyze your debt ratio at (513) 520-6044 or email me at bahale1@gmail.com
Friday, March 5, 2010
Thursday, March 4, 2010
U.S. Department of Housing and Urban Development (HUD)
HUD protecting children from lead paint.Details -->U.S. Department of Housing and Urban Development (HUD)
Saturday, February 27, 2010
U.S. Department of Housing and Urban Development (HUD)
Warning against loan modification scams: U.S. Department of Housing and Urban Development (HUD)
Thursday, February 25, 2010
Tuesday, February 23, 2010
Monday, February 22, 2010
Extended First Time Home Buyer Tax Credit
Don't Miss It!
Dear first time homebuyer: are you one of the many who did not get the chance to buy a home in 2008 or 2009? Maybe you were worried about your job, the economy, or maybe you looked around at a few homes and didn’t find something that you were picturing as your “dream” house?
2010 has dawned upon us and home prices are still low, interest rates are still low, and like flowers in the spring, the economy seems to be showing tiny signs of green shoots…
…and you still have a chance to buy a home and benefit from the tax credit!
Are you aware that the tax credit has been extended? Yes, indeed you have been granted that rare second chance to get out there, find a home, and receive money for your efforts!
As part of the ongoing plan to stimulate the US housing market, congress passed legislation in late 2009 to extend the First Time Home Buyer Tax Credit until April 30, 2010. You can receive up to $8,000 with this tax credit. Just imagine the things you can do with that amount of money!
You may be worried: what if I can’t find a house…negotiate the contract…and close on my new home by April 30, 2010? That date is fast approaching! Well, there’s good news on this as well: you have to be under a written, binding purchase contract by April 30, 2010, but you have until June 30, 2010 to close – that’s plenty of time!
So don’t miss out on this opportunity – you have the chance to purchase a well-priced home, obtain a home mortgage with a historically low interest rate, AND receive a tax credit. So make a goal today to rent no more! Please contact me at (513) 520-6044 or email me at bahale1@gmail.com to get started!
Dear first time homebuyer: are you one of the many who did not get the chance to buy a home in 2008 or 2009? Maybe you were worried about your job, the economy, or maybe you looked around at a few homes and didn’t find something that you were picturing as your “dream” house?
2010 has dawned upon us and home prices are still low, interest rates are still low, and like flowers in the spring, the economy seems to be showing tiny signs of green shoots…
…and you still have a chance to buy a home and benefit from the tax credit!
Are you aware that the tax credit has been extended? Yes, indeed you have been granted that rare second chance to get out there, find a home, and receive money for your efforts!
As part of the ongoing plan to stimulate the US housing market, congress passed legislation in late 2009 to extend the First Time Home Buyer Tax Credit until April 30, 2010. You can receive up to $8,000 with this tax credit. Just imagine the things you can do with that amount of money!
You may be worried: what if I can’t find a house…negotiate the contract…and close on my new home by April 30, 2010? That date is fast approaching! Well, there’s good news on this as well: you have to be under a written, binding purchase contract by April 30, 2010, but you have until June 30, 2010 to close – that’s plenty of time!
So don’t miss out on this opportunity – you have the chance to purchase a well-priced home, obtain a home mortgage with a historically low interest rate, AND receive a tax credit. So make a goal today to rent no more! Please contact me at (513) 520-6044 or email me at bahale1@gmail.com to get started!
Sunday, February 7, 2010
What To Expect When Applying For A Mortgage Part 4
Your Initial Consultation and Beyond
If geography allows, you will meet with your mortgage consultant in person, so that you can further discuss your personal financial goals and expectations. Your mortgage consultant will want to make sure that she is advising you of the proper loan programs to meet your specific needs and budget. This consultation ensures that you are comfortable with the process and well-informed of your choices. Your mortgage consultant will guide you step-by-step through the loan process, and will manage all the details of your transaction. She will keep you updated, educated, and in control.
If you are applying for a pre-approval for a purchase loan, your mortgage consultant will guide you as to how much of a house payment (including principal and interest, private mortgage insurance, property taxes and homeowners insurance – PITI) is within your budget. That monthly payment will translate to a purchase price range that you can shop for homes within. Once you have chosen a property that you want to write an offer to purchase on, she will provide your realtor with a customized pre-approval letter. The pre-approval letter will help strengthen your purchase offer’s position with the prospective seller of that property.
Applying for a mortgage can be a daunting task. The important thing to remember is to be well-prepared before calling your mortgage consultant. If you’ve reviewed your credit history recently, there should be no bombshells. If you have your income and asset documentation saved and readily available, then it should take just a few minutes to get everything together. Your mortgage consultant is there to make the process easier for you. She is knowledgeable, efficient and focused on making your experience pleasant.
If you’d like to discuss the mortgage process in greater detail, please contact me at bahale1@gmail.com.
If geography allows, you will meet with your mortgage consultant in person, so that you can further discuss your personal financial goals and expectations. Your mortgage consultant will want to make sure that she is advising you of the proper loan programs to meet your specific needs and budget. This consultation ensures that you are comfortable with the process and well-informed of your choices. Your mortgage consultant will guide you step-by-step through the loan process, and will manage all the details of your transaction. She will keep you updated, educated, and in control.
If you are applying for a pre-approval for a purchase loan, your mortgage consultant will guide you as to how much of a house payment (including principal and interest, private mortgage insurance, property taxes and homeowners insurance – PITI) is within your budget. That monthly payment will translate to a purchase price range that you can shop for homes within. Once you have chosen a property that you want to write an offer to purchase on, she will provide your realtor with a customized pre-approval letter. The pre-approval letter will help strengthen your purchase offer’s position with the prospective seller of that property.
Applying for a mortgage can be a daunting task. The important thing to remember is to be well-prepared before calling your mortgage consultant. If you’ve reviewed your credit history recently, there should be no bombshells. If you have your income and asset documentation saved and readily available, then it should take just a few minutes to get everything together. Your mortgage consultant is there to make the process easier for you. She is knowledgeable, efficient and focused on making your experience pleasant.
If you’d like to discuss the mortgage process in greater detail, please contact me at bahale1@gmail.com.
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