How Much Home Can You Afford to Buy?

Have you ever asked yourself this question: How much home can I afford to buy? If you did, and are still wondering the answer, we’ll help to answer it here.

How Much Home Can You Afford to BuyFiguring out just how much home you can afford is an important aspect of buying a home. You find a home you absolutely love and begin the whole loan process only to be disappointed because you simply cannot afford it. By figuring out how much house you can afford beforehand, you can avoid this disappointment and frustration.

The main factors you need to consider when looking at home affordability is your income vs. debt. We all know the importance of income, when it comes to borrowing; lenders want to know that you can pay your mortgage comfortably, while maintain your other debt. Essentially, no more than one third of your income should go towards housing costs. This applies whether you rent or buy. It is especially important if you are buying a home using the 33% rule, you can calculate just how much home you can afford. You need to remember, that this is not only the mortgage, but also homeowners insurance and property taxes.

While your income and the actual housing costs are important factors you must consider, there is also the home loan itself. There are aspects of the loan that will have a direct relationship to how much of a house you can afford. Essentially, your goal in finding a mortgage should be to get the best interest rate for the long term. The mortgage rate will depend on many factors, many of which you have some control over. One of these factors is the number of points you pay on the mortgage. They are the fees you pay to the lender at the closing of the home loan. Many lenders will only advertise one loan rate based on a certain number of points. However, you can ask if there are other options that will lower your interest rate on the mortgage. In general, the more points you pay at closing, the lower the interest rate. This may be a good option for those who have some cash after the down payment and would like to lower their overall mortgage payments in the future. Paying fewer points may be attractive to those who don’t have a lot of cash left over after the down payment.

You need to do a little bit of work in calculating how much home you can afford before shopping for a home. Make sure to consider your income, how much you have saved for a down payment, the amount of debt you have and the costs of insurance and taxes. By doing a little work, you will have a good idea as to how much home you may be able to afford.

Any of the professional full-time realtors at GayRealEstate.com will be happy to refer you to a reputable lender that can help you work through a pre-qualification before looking at homes ~ this will prevent any unwanted surprises.

Author Jeff Hammerberg is the Founding CEO of GayRealEstate.com. Instant Free Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast. FREE Buyers Representation ~ Free Relocation Kit to any City, USA ~ Free Sellers Market Analysis for home sellers.

Home Refinancing Basics

In today’s world of tight credit standards, government confusion, and record-low interest rates, it is beneficial to every homeowner, regardless of status, wealth, or property type, to know the home refinancing basics.

Homeowners all across America as well as many other countries are clamoring to take advantage of these low interest rates, and in order for them to be successful, they should consider three factors:

  1. Refinancing only makes sense if the long term savings outweigh the cost of refinancing.
  2. Homeowners should be very thorough in researching and selecting the best loan option.
  3. The choice of financial institution is important.

Refinancing a home involves certain costs, also called “points,” “origination fees,” or “discount fees.” When considering whether to refinance, it is vital that points and fees be taken into consideration. The short term cost (or long term if a “zero point loan” that builds the cost into the new loan,) must be balanced with the anticipated savings, eventually leading to a calculation of how long one must own the house to make up for the costs and realize a savings.

If, for example, a refinance would lower the monthly mortgage payment by $100 and the points on the loan amount to $3,000, the homeowner would need to keep the home for 30 months before the refinance would start netting a savings.

After the mortgage crisis and mass defaults on sub-prime mortgages, it is more important than ever to research what type of loan to refinance into, specifically the term of the loan and the type of interest rate. Mortgages over a shorter term for example 15 years versus 30 years, have a much higher monthly payment but result in a substantially lower total cost of borrowing (interest.) Long-term mortgages have the reverse effect.

Loan variability means choosing between a fixed interest rate that is unchanging for the life of the loan or a variable rate, of which there are many varieties, with rates that change at certain points during the life of the loan. Each type has its own pros and cons.

As far as choosing which financial institution to utilize, the most important factor is to shop around. The holder of your current mortgage may offer a great savings of time in that they already have much of the necessary information and potentially also a monetary savings as a reward for loyal customers. Another option is to ask for referrals from your trusted real estate agent ~ they work with lenders every day… it’s more important to have a trusted adviser than to have an offer of ¼ point less from an “unknown” in another state.

There are nearly infinite banks and mortgage companies worth exploring, and only after researching the institutions as well as the above enumerated considerations of total savings and mortgage type can a truly informed decision be made.

Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com ~ The Nation’s Largest Free Directory of Gay, Lesbian and Gay Friendly Realtors offering Free Buyers Representation, Free Sellers Competitive Market Analysis and Free Relocation Kits to Any City, USA.

How Much Cash Do I Need for a Down Payment when Buying a Home?

Getting pre-qualified before touring homes can be a great way to ensure that you can act fast in today’s real estate market.  When you’re on the prowl for that perfect property and are ready to pounce, the last thing you need is a pre-qualification delaying your offer.

One of the questions your mortgage professional with inevitably ask is, “How much do you want to put down?”  Your down payment can be a gateway into a variety of useful mortgage programs suited for a wide range of needs.

It’s important to note that mortgage program guidelines are always in a state of flux, so be sure to contact one of our real estate professionals to make sure you’re prepared with the latest information.

Mortgage Programs

There are three main mortgage programs you for which may qualify, based on your down payment amount and credit scores:

  • FHA (Federal Housing Administration)
  • Conventional
  • VA (Veteran’s Administration)

Down payment requirements for each program were consistently updated in relation to current market conditions.  In most cases, the more you put down on your new home, the more incentives the loan program provides.

Since most consumers are primarily concerned with interest rates (and rightly so), remember that the minimum down payment may not always get the best interest rate, while a higher down payment will expand your loan program opportunities.

Mortgage Insurance

If a lender is at a higher risk of loss when a buyer may default on a loan program, the lender will usually require you to pay for an insurance policy on their behalf called mortgage insurance (MI).

Traditionally, this is required on a loan with a down payment less than 20% of your new home’s purchase price.  VA loans, however, are exempt from paying MI.

Down Payment Tiers

There are three main down payment levels that will progress you through the various loan programs for a traditional single-family home.

  • No-Money Down (currently limited to VA loans only)
  • 3.5% down (FHA)
  • 5% down (Conventional

VA loans are limited to those currently enlisted in the military and veterans.  While there is no down payment requirement on VA loans, a funding fee will be required by law.  This fee can be reduced with a down payment of at least 5% down and also be financed with your loan if needed.

FHA financing will require a minimum of 3.5% down and an up-front mortgage insurance premium (UFMIP) to be paid.  This fee is also constantly revised through mortgagee letters issued by HUD, so be sure to check with your mortgage professional for the latest UFMIP amounts.

Conventional loans require a minimum of 5% down and have the largest variety of loan programs available.  A conventional loan is a traditional loan by a bank with competitive interest rates based on your credit scores.

Talk to your Real Estate and Mortgage Professional

As you can see, obtaining financing can be a difficult process if tackling it alone.  Luckily, our real estate agents have dedicated themselves to understanding this process completely and have teamed up with mortgage professionals who share the same passion.

Contact a gayrealestate.com agent today to get started.

Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com offering Free Instant Access to Gay, Lesbian and Gay Friendly Realtors Coast to Coast.

The difference between pre-qual. and preapproved for mortgage.

Many LGBT real estate buyers and gays and lesbians borrowing a mortgage to finance or refinance a home want to know the difference between a prequalified and a preapproved loan. On the surface they sound quite similar, but in practice they have significant differences that relate to the level of commitment a lender is making to the LGBT borrower.

 

  • The big difference is that prequalification has to do with the process a lender goes through to find out if a gay real estate buyer is eligible for a mortgage. This typically means that the lender will check the credit rating of the LGBT mortgage borrower and ask for a few financial details. Gay and lesbian real estate buyers who meet basic criteria for borrowing will be considered prequalified – which means they essentially qualify for making a loan application.

 

  • But in no way does prequalification represent a legal commitment on behalf of the lender to actually loan money. It is no guarantee that the LGBT borrower will get the loan, it is more like a prediction that the gay borrower will succeed in getting a loan once they make an official loan application.

 

  • In other words, prequalification is a screening or filtering process to weed out those LGBT borrowers who don’t have a chance of qualifying for a loan. Without loan prequalification it is too easy to assume that a loan is forthcoming, and that misleads the LGBT real estate buyer by giving them false hope. It is also a waste of time for the lender, who wants to concentrate instead on those LGBT mortgage borrowers who do qualify and will eventually have a realistic chance of getting a loan.

 

  • Preapproval, on the other hand, is a status that represents a much bigger commitment by the lender. For a gay or lesbian home buyer to go through the necessary steps of getting preapproved, they basically have to do all the documentation of income, assets, and credit that is involved in a full blown mortgage application process.

 

  • If they pass all of the standards set by the lender, then the lender makes a firm commitment to providing a loan – and the lender specifies exactly how much the LGBT home buyer can borrow.

 

  • Armed with that information the LGBT buyer can then go with a gay-friendly Realtor to shop for homes in that price range and negotiate with sellers from a position of strength. Since the seller can see a lender-signed letter of loan preapproval, that lets them know that the potential gay or lesbian buyer really does have the financial means to purchase.

To learn more about LGBT mortgages and how gay and lesbian real estate buyers can get preapproved or prequalified for a loan from a LGBT or gay-friendly mortgage company, check out the informative articles and resources at GayRealEstate.com. The site has everything a LGBT borrower needs to find a loan and a home, and it maintains the largest database of LGBT Realtors and gay-friendly real estate agents in the world.

Three Common Pitfalls for LGBT Home Buyers to Avoid

Buying a home is huge step, and often represents the culmination of a lifelong dream. But while under the thrilling spell of the home buying experience many LGBT buyers fall victim to three of the biggest mistakes. Became familiar with these pitfalls to successfully avoid them.

#1

Overreaching

One of the many companies directly owned by Warren Buffett, the most successful investor in American history, is a business that builds and sells homes across the United States. Addressing the shareholders of that company Buffett explained that when he is qualifying a home buyer he looks at two fundamental financial requirements. He wants “a meaningful down payment” and he expects that the monthly payments constitute “a sensible percentage of income.” That’s a simple and sound approach that LGBT buyers should follow when shopping for a home.

These days most banks require a rather conservative debt to income ratio of about 30 or 35 percent. That means that if a homeowner’s monthly income is $5,000 then their combined housing expenses – including such things as the mortgage, homeowner’s insurance, and property taxes – should not exceed about $1,650. LGBT loan applicants may find lenders who will still qualify them at higher ratios of debt, but it is not wise to accept burdensome loans with steep mortgage payments. In fact, most financial planners and mortgage experts recommend that LGBT buyers err on the side of greater caution and stick to housing expenses that don’t exceed 25 percent of their income. That gives them a manageable loan and a comfortably protective buffer against any unexpected calamity that might happen in today’s challenging economy.

 

#2

Buying a House to Get a Slab of Granite

No matter what kind of property they are looking at, residential buyers have a tendency to purchase cosmetic curb appeal because it resonates with them on an emotional level. A buyer will fall in love with the apple tree in the back yard, the urban chic brickwork in a downtown loft, or the granite counter tops in a condo unit. Those are great assets and amenities, and if a home has them they can add to its allure. But LGBT home buyers should not confuse cosmetics or isolated features with underlying and sustainable overall value. Minor features can always be upgraded, and amenities can also be added to a home – but home buying decisions should consider everything being bought, not just one or two exciting perks.

Superficial reasons to buy may be compelling, but the smart buyer will look beyond giddy emotions to make more realistic, level-headed decisions. There is nothing wrong with buying the cute front door, in other words, as long as it opens into a home that meets the rest of a buyer’s carefully articulated criteria. The bottom line valuation of any property should also be based on fresh market data, a keen buyer-ordered inspection, and an objective professional appraisal. The goal is to ensure that the home is both cosmetically attractive and structurally and mechanically sound and free of defects.

 

#3

Picking the Wrong Realtor

Perhaps the biggest pitfall is shopping for homes without first shopping for the best possible real estate agent. The majority of buyers wind up making the biggest financial decision of their lives – the purchase of a home – without giving much thought to how they shop for the Realtor who will guide them through the process. Most people enlist the services of an agent by calling the phone number posted on the “for sale” sale in front of a home that they find interesting. Whoever answers the call instantly becomes their Realtor. But most LGBT consumers would never hire a financial consultant, building contractor, attorney, or even a house sitter or professional home cleaning service by just responding to the first ad and phone number they see. They would instead first perform some basic due diligence, conduct a few interviews, and then try to make an informed selection.

For LGBT buyers the best course of action is to hire a LGBT or gay-friendly Realtor, because there are many significant issues that are of special, specific concern to LGBT home buyers. There are gay marriage legalities to consider, tax implications, rights of survivorship, and rules regarding how credit is evaluated for non-married partners applying for a mortgage. All LGBT buyers also share a common interest in understanding how supportive a particular community or neighborhood is, especially if they are relocating to a new area. Only another member of the LGBT community can adequately address those issues with a depth of personal experience, so generally speaking all LGBT buyers are better served by taking advantage of the help of a qualified LGBT or gay-friendly real estate agent and mortgage broker.

To find real estate professionals dedicated to active support of the LGBT community, visit http://www.gayrealestate.com, or call toll free 1-888-420-MOVE (6683).

Click here for list of gay realtors, lesbian realtors and gay friendly realtors nationwide.

If you have a real estate story that you’d like to share with us with the LGBT community, please contact us at manager@gayrealestate.com.