When an appraiser makes his property value assessment of a home, one of the things that is considered is the neighborhood in which it is located. This can be an influencing factor on the home’s value and it is also something that the homeowner should give a lot of consideration to before they purchase a house. In general, there are several common considerations such as the quality of the schools, crime rate, property values and traffic issues. There are several other items that you will want to consider along with the standard factors. Continue reading »
Posts Tagged ‘buying a home’
The question that comes most often when you start the house buying process is how much can I borrow for a mortgage The main factor that determines such a situation is that how much mortgage payment you can handle depending on your monthly income and your monthly debt or obligations.
How much can you borrow?
When you ask yourself the question of “how much can I borrow for a mortgage”, it will depend on the following major factors:
• Monthly income: Usually housing expenses do not exceed 25% – 28% of the homeowner’s gross monthly income. The housing expenses include monthly mortgage payments with interest, property taxes and home owners insurance, if any. You can also consider the overtime bonus and commissions, income from self employment, interest and dividend income, rental income, as income, if not your steady employment.
• Debts: Your monthly debts and obligations will also be taken under consideration by the lenders. Your housing expenses and your long term debts should not exceed 33% – 40% of your gross monthly income. Long-term debt is usually considered by the lenders as monthly expenses. So it is advisable that you pay off as much debt as possible before you apply for a mortgage.
• Down payment and closing costs: Lenders will expect you to have enough money available to make the down payment, which is usually 20% of the price for the house. They also expect to get closing costs which is 3% – 6% of the loan amount. The sources for a down payment may be savings, stock and bonds, mutual funds, etc. There are some mortgage programs that allow using a gift of money or grants, (which need not be repaid), as a part of your down payment.
• Credit score: If your credit score is not good, then you will not get the approval of getting a mortgage from the lenders.
So, answering the question, “how much can I borrow for a mortgage” is not as easy as one might think. It depends mainly on your current financial situation. You have to calculate your monthly expenses and income to calculate the maximum mortgage payment that you can afford. There are also many other factors that lenders take into consideration. You should fully understand those factors in order to determine how much mortgage you can really afford to take.
There are many factors to consider when deciding to buy your first home. The time has to be right for the purchase of a new home and the right time to purchase a new home isn’t dependant only upon how the market is in your area. The right time to buy your first home is also dependant on your current life circumstances. Meaning, before buying a home you must do your homework and see if this life changing decision is currently the right decision for your situation.
When purchasing a home you must consider your work history, credit history, savings, and affordability. Some questions to consider:
• Have you had steady income in the past two years, and if you haven’t what has caused your employment to not be steady?
• Has your income fluctuated, and why?
• Do you have a history in paying your bills on time?
• Have you defaulted on loans previously?
• What does your credit report show, is it favorable?
• Do you have a savings account, and how much have you saved?
• Can you afford a mortgage at the present time?
After considering the questions above, remember that you must consider added cost as a home owner. Homeowner’s Insurance, private mortgage insurance, home association fees, property tax, and maintenance and improvement cost are added expenses for many home owners. Are these cost that you will be able to afford as a new home owner?
After reviewing the information I have listed you should know if today is the right time for you to act on purchasing your first home. Is today the right time for you to be a first time home owner or is it best in your personal situation to continue to rent a home? Please share by commenting how you are ready to buy a home or how you could better prepare yourself to purchase your first home. Others can better prepare themselves in buying their first home by learning from the information I provided and by your personal examples shared.