Home Buying Self-Assessment

Starting a home-shopping / home-buying process means answering a lot of questions:

Are you ready to buy a home? How much of a mortgage loan can you afford? How's your credit? What size house do you need? What area do you prefer to live in? How are your cash reserves?

The more Q&A, research and soul-searching you do in advance, the smoother the home buying process will be later on. Let's look, then, at some key questions you should ask yourself in the self-assessment phase.

What Can You Afford?
Before house hunting, determine how much of a mortgage you can comfortably afford. "Comfortably" means you can pay your mortgage each month and still have money for living expenses, savings, and quality-of-life niceties.

In other words, you don't want a mortgage payment that forces you to "squeak by" each month.

To determine your mortgage comfort-zone, you need three things: a budget, a price and a mortgage calculator. For the price, just start with the cost of a house you think you might be interested in buying.

At first, don't worry about whether the price is too high - you'll find that out soon enough when you run the numbers.

Next, run the home price through a mortgage calculator at current interest rates and at a 30-year fixes mortgage. (You might choose a different mortgage type later on; but this exercise is just to get a ballpark mortgage payment based on home price, so choose the 30-year fixed option for the sake of simplicity.)

Mortgage calculators can easily be found on the Internet. Just type "mortgage calculator" into any major search engine, and you'll find several. Or even easier, you can just use one of our mortgage calculators.

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Buying A House? How Much Home Can You Afford?

Maybe youÂ’'ve heard the expert advice that your debt to income ratio shouldn't be more than 36 percent of your total income.

But do you truly know what that means, and how lenders will look at your financial history in order to decide whether or not to extend you a mortgage?

If you need help figuring out your debt to income ratio, simply follow the guidelines below and soon you'll know whether or not you're in a position to apply for a mortgage loan.

Your debt to income ratio is the amount of monthly debt you pay out in contrast to how much income you have coming in. Start by figuring the easy part -- your income.

If you are on a structured paycheck, then it will be easy -- simply calculate your monthly salary. If you work on a commission or other type of varying income, total your last six month's earnings and divide by six.

Now you will need to figure your monthly debt. You should total your car payment, credit card payments (use the minimum amount payments for this calculation, even if you pay more), any other monthly deb -- such as child support payments -- along with the estimated amount of your new mortgage payment.

Now, take the total of your debt payments and divide it by your income and you will have your debt to income ratio. Most lenders will want to see no higher than a 36 percent debt to income ratio, although there are a few exceptions.

If you find that your debt to income ratio is so high that you may not be able to quality for a mortgage, you should try to pay down some of it before applying for your loan. This will not only better your chances for a mortgage loan, but it will also ensure that you quality for one with better interest rates and terms.

About the Author
Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans. To see a list of recommended mortgage loan companies online, visit this page: www.abcloanguide.com/mortgageloans.shtml

Important Things to Know Before Buying a Home

Are you going through all those anxiety pangs that one normally gets while mulling over the decision of buying a home?

Homebuyers are an anxious lot, eager for useful real estate information. It pays to get yourself acquainted with the steps involved in the purchase of a home.

Here's a list of important things to know before buying a home.

1. The first step is to find out how much you can afford or qualify for. Check your credit report to know your credit worthiness. Clear up problems if any before going to a lender. A good credit rating will result in you receiving lower interest rates.

2. Get pre-approved for a mortgage from a mortgage broker or lender, with a commitment to fund your mortgage in writing. Look out for frequent payment options and prepayment options, which would help knock off some years from your mortgage. And finally, settle for comfortable monthly payments. Once pre-approved for a loan, you will know your price range to begin shopping for real estate.

3. You should buy the real estate that is right for you. Make a wish list of all the specifications you want in your home. Prioritize them based on your wants and needs. Then mark out those aspects that you are willing to compromise on, in case you need to.

4. Get a good, reputable Real Estate Agent to assist you in locating a property in a desirable location. Your Real Estate Agent will know where to help you look for properties, while keeping your preferences and price range in mind.

5. Once your agent provides you with a list of properties that are affordable, you can drive by to check the neighborhood. Look for a house in a location that has good potential for future appreciation. Consider factors like safety, school districts, freeway access, recreational options, work commute time, shopping facilities etc.

6. Check out a sufficient amount of real estate until you develop a sense of comparative value of each neighborhood. Your real estate agent can help you with the valuation.Visiting the localities at different points in time during the day is ideal. This will help narrow down the list. You might want to check during the morning commute, or after dark to verify that the neighborhood suits you.

7. When you have found a house of your choice, compare its price with other houses in the area. Get your real estate agent to assess the value of the home.If all looks good, write an offer!

8. Lastly, consult your real estate agent to be sure that you obtain any professional inspections necessary to answer any questions you may have about the property.Some concerns may include: the condition of the roof, foundation, walls, plumbing, electrical, windows, etc.

Other concerns may be: Is the property in a flood zone, or wildfire area.Is the property subject to Mello-Roos? Are there CC& Rs? Are there any easements on the property, etc.Your professional Real Estate Agent will assist you in answering these and other questions you may have prior to closing escrow on a property.

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Are You Read to Buy a Home?

Buying your first home is a big step. How do you really know that you are ready? There are hundreds of thousands of people out there that are considering buying a home. This is partly due to low interest rates over the past few years, and by a real push on the part of the housing industry to show the benefits of homeownership.

You've been saving your money and have enough for a down payment and your closing costs. The down payment will need to be between 3% and 20% of the purchase price or property value, whichever is lowest. Always aim to have that 20%. If you don't put at least 20% down, you will have to purchase private mortgage insurance, which will increase your monthly payment.

Closing costs usually run you 3% to 7% of the purchase price. You should receive a Good Faith Estimate of these costs within three days of applying for a mortgage. Keep in mind that this is only an estimate, and not the actual costs. But it should be close. Plan to pay the 7%, and then perhaps you will have some left over. It is better to have more than you need.

You know you are ready when you know how much home you can afford, and you are willing to stick with this. Your monthly mortgage payment should be less than 25% of your gross monthly income. There are lenders that will tell you that you can afford much more, but don't listen to them. Stick with what your budget says you can spend.

You are also aware that there are more dollars in a home than just the mortgage payment. You will need homeowners insurance, money for utilities, maintenance costs and property taxes. Owning a home is a lot of responsibility. You can't just pick up and move at 30-days notice anymore.

It is important to take the time to check your credit report for any errors and inaccuracies. Almost 90% of consumers will have an error on their credit at some point. These errors can cost you thousands in increased interest rates. Don't ever go to a lender unprepared and uninformed. Know your credit score.

If you look early enough, you may have time to fix errors or build your credit back up. Plan on at least six months for this, just in case.

You also are ready if you are willing to hold off any other loans or credit until you close on the property. The same goes for changing your jobs. You need to hold your life "as-is" from now until the closing. No new cars, no credit cards and no new jobs. Show that you are stable.

Part of being ready is just feeling ready. If you know what homes sale for in your area, you are definitely ready. If you don't know the above things, then take the time to figure them out. There is more to buying a home than just shopping and moving.


About the Author
Martin Lukac (http://www.MartinLukac.com), represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!

Home Buying - What Can You Afford?

Okay, youÂ’ve decided to buy a home and are trying to figure out what you can afford. Before you go home buying, you need to carefully consider what you can afford as far as a mortgage payment.

Mortgage Payments
The first step you should take in determining what you can afford is to talk to a mortgage lender.

In fact, the best step you can take is to go through the loan process to the extent required to get a pre-qualification letter. A pre-qualification letter tells you and a seller how big of a home loan the lender will give you.

So, once you have the loan in hand, that must be the amount you can afford? The answer is maybe or maybe not. The prequalification letter is based on a number of factors such as your earnings and credit. It is not based on a picture of your life, which can lead to problems.

Other Expenses
There is nothing worse than buying a home and straining to make the monthly mortgage payments. This situation occurs when a homebuyer relies solely on the pre-qualification letter or their own wishful thinking. You may have purchased your dream home, but donÂ’t let the payments be a nightmare.

In determining how much you can afford to expend on a home purchase, you must consider your overall financial situation. Although you may be in a decent financial situation at the moment, do you have future expenses that will put pressure on your finances?

Such situations might include:
1. Planning to have kids in the next year or so?

2. Are your current children going to college soon?

3. If you own a business, is the financial outlook stable?

4. If you work for a company, are you reasonably sure the company is headed in the right direction?

5. Do you have any concerns regarding the dreaded downsizing?

6. If you are the sole bread winner, what would happen if you were unable to work for a few months because of health issues?

These general questions are intended to wake you up to the possibility of over extending yourself on a mortgage. Every situation is different, so make sure you take a careful look at your life to make sure you are committing to a loan you can afford now and in the future.

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Buying your first home? Here’s what you need to know

You’ve made the decision to make one of the largest investments you’ll ever make in your life-buying your first home. You’re excited, but at the same time anxious. Some of the questions you may be asking are: Will I be able to afford the home of my dreams? Do I have enough money for a down payment? Can I get a home inspected before I make an offer?

Rest assured, you are not alone. According to the 2000 National Association of REALTORS® Profile of Home Buyers and Sellers, first-time homebuyers accounted for 40 percent of the homes purchased in 1999. The homebuying process can be overwhelming, but if you go into it prepared, your first purchase can be a good experience. Here are some things to consider before making the plunge. Getting a mortgage - Fear of being rejected for a home loan is one of the main concerns for first-time homebuyers. To lessen the stress, you may want to get pre-approved for a loan before looking at prospective homes. This will not only help you feel more confident, it will also give you an advantage when there are multiple offers for a specific home. The fact that your loan has already been approved is of great value to the seller: because it shortens the purchase process and there is less of a chance that the buyer will back out of the sale. Mortgage Payments - The costs involved in the purchase of a home can be overwhelming to first-time buyers. However, with the help of a real estate professional, you can calculate out how much they you be able to pay each month in mortgage payments, and from there, what prospective homes offer a feasible payment plan. Down-Payment - The down-payment amount varies depending on the value of the home you choose and your mortgage lender. And in some cases, first-time home buyers can purchase a home with no money down. Although it varies from state to state, most offer government-funded programs for first-time buyers that help people buy a home with no down-payment. Your real estate professional will be able to explain the different options available to you. Closing Costs - First-time buyers often forget to consider the closing costs when making an offer on a home. Paying closing fees of up to 10 percent of the home sale amount is not unusual. Add that to the down-payment and you’ll have quite a sum to raise before the final papers can be signed. However, a smart first-time buyer takes this into account before making an offer, and with some professional help, the costs can be estimated in advance. Making offers - Don’t feel pressured into making an offer on the first home you see. This is a common mistake of many first-time homebuyers. Make sure you view different homes to get a feel for the marketplace. When you do decide on a home to make a bid on, work with your real estate professional to get all of your questions answered first before making an offer. But don’t wait too long to make an offer. The longer you wait, the greater the chance other prospective buyers may place offers, making it harder for you to negotiate a good deal. Condition of the Home - Buying a “problem” home is another fear of first-timers. A home that needs major repairs can become a costly venture. And, unless the asking price is adjusted to reflect the hidden repairs needed, chances are the home is not worth as much as the seller is asking for it. To avoid unfortunate surprises, your real estate professional may advise you to hire a home inspector before making a serious offer. That way, you know what you are getting into. Above all, remember that there are no silly questions. Make sure you understand and are comfortable with every aspect of the transaction. Your real estate professional can be an invaluable asset in helping you make educated decisions so that your first-home purchase is a rewarding experience.


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Buying Pre-Construction? Here’s Why A Real Estate Professional Should Represent You

It might not seem necessary to involve a real estate professional in a transaction where a buyer can deal directly with a builder. Think again! A real estate professional representing the buyer’s interests, can guide you along the right path, smooth the rough places and help ensure you make a decision you can live with (and in) for many years. Here’s how:

* Just as a real estate professional calls on experience and knowledge of an area to help buyers locate pre-owned homes in a community, he or she can also direct buyers interested in newly built homes to developments and communities that match client specifications.
* An agent can suggest builders based on their reputation for delivering a high-quality product, responding quickly to issues, and being financially sound.
* An agent may be familiar with how a builder prices his products and where there may be room to negotiate price or upgrades.
* Without agent representation, you are one buyer purchasing only one home. But an agent can significantly impact a builder’s bottom line by providing a steady supply of customers. The agent’s leverage may work in your favor at the negotiating table. [Note: The builder may require your agent to accompany you on your first visit to the site. Check with the builder.]
* When relocating to a new area, agents can be particularly valuable resources. In addition to providing local area information regarding schools, day care or elder care services, public transportation, proposed development, and so on, once construction is under way, an agent can periodically stop by the work site, supply you with progress reports, and photograph or videotape phases of the construction.
* An agent can assist you as you face hundreds of design choices and consider which upgrades could potentially add value to the home when it comes time to sell.
* An agent can accompany you at the site while you okay the plumbing and electrical locations prior to drywalling, as well as on the walk-through or builder orientation.
* By now, you should be convinced of a real estate professional’s value as you search for and purchase a newly built home. Still, here’s one more great reason to work with an agent-the builder pays the agent’s commission. You enjoy individual attention and support at no cost to you. What a great way to start life in a new home!


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