July 14, 2009
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Debt Ratios is more than likely, the most significant and important aspect of lending to date. A Debt Ratio is defined as the percentage of debt compared to you gross income. In order to have a Debt Ratio of 20, your bills and required spending for a month must be equal to 20% of your gross income for that month. Every lender will have a varied debt ratio, depending on different factors.
Lenders have a hard task to face when calculating and basing a loan on your debt ratio. Lenders of course, would like to give you the biggest loan they can because the interest will be larger. The interest coming back on an $80,000 loan will be larger than a $40,000 loan, and even though it would profit them, there is still the chance that the borrowers won’t be able to pay back the loan. If the lender gave a higher loan, the monthly payment for the loan may be too great for the home owners and due to non payments; they may have to foreclose the home.
The task of the lender is to find a common ground in between these two. While making sure they give a loan sufficient enough to help the borrowers, they need to make sure that it’s a safe investment and that they will be able to pay back the loans. So overall, it’s the largest loan possible within the parameters of the loan being paid back in a timely manner. Once again, it’s also dependant on what the lender is comfortable with, if they believe that the borrowers will be able to pay back a higher loan, then they may take the risk, every lender is different. Lenders have to use the debt ratios and determine which loans go along with which debt ratios in order to make sure the loan payments can be realistically met, while helping the borrowers.
July 13, 2009
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Many people read a magazine, and buy products due to advertising and marketing influences. However, buying a home is a marathon and should never done on impulse because of the significant negative impact on your financial resources. This is an important once in a lifetime purchase.
First thing to do is to select the location you want to live in or nearby, and rent for a year because your new home is going to tie you and your family down for 5-10 years. Renting allows you to explore surrounding neighborhoods, community amenities, schools, restaurants, and night life with the chain and ball that comes with a large financial decision. Only buy when you are truly in love with the location.
There’s always value to owning a home, but home ownership requires a lot of responsibility. Buy a home for the right reasons, and not just to flip it for a quick buck unless you are already well versed real estate investing.
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How big of a mortgage loan you can borrow depends on different factors. Lenders are mostly concerned with your debt ratio and the loan amount, and how you plan to spend the money. Even though it’s based on your finances, it also depends on what you feel comfortable borrowing, and how much mortgage lenders are willing to give you. The question of how much you can borrow depends on a mutual meeting between both parties. Some lenders are willing to let you borrow a very high amount, and the home owners may not feel comfortable with that amount, and sometimes the home owners may ask for more and the lender may not feel comfortable with letting them borrow that much.
The situation is going to vary depending on your debt ratio and lending guide lines. The mortgage programs do have different lending rates based on various parameters, but for the most part they depend on the debt ratio. All borrowers are different, a program that may work for one person, may not necessarily work for another. Even though the amount given to you may be more or less then what your ideal goal is, it’s mostly dependent on the debt ratio you have and your needs.
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Home prices are determined in cycles. However, your agent will always tell you that every day is a good day to buy because commissions is their main incentive.
It is important to stay ahead of the curve by paying attention to the number of homes listed as a larger supply of inventory will drive home prices listed on the market lower. Also, prices are softer during the winter months.
Doing a little more due diligence than other buyers can easily save you thousands of dollars on purchasing a new home.
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Before the internet, house hunting starts at the real estate agent’s office where you make a schedule for them to drive you all over town to see a couple of houses that eat up a lot of each others’ time until you find something that you are looking for. The internet solved a huge waste of time for the real estate industry, where the potential buyer has already done all research and know exactly which house they want to look at before arriving at the real estate agent’s office.
Call it window shopping for houses. And it is extremely effective, because you will only be looking at houses that you are interested in rather then the agent’s taking you to houses that you will never buy.
Many real estate websites allows you to select residential properties by zip code, price range, number of bedrooms & baths, and various requirements. Why settle for looking at 4-5 homes that your real estate agent has available when you can literally look through hundreds of thousands of home in advance.
