Buying Your Home - What You Can Afford
How much does my real estate agent need to know?
Real estate agents would say that the more you tell them, the better they can help you screen prospective properties, saving you loads of time, and the better they can negotiate on your behalf to help you successfully buy the home of your dreams.
Agents working for buyers have three possible
choices: They can represent the buyer exclusively, called single agency, or represent the seller exclusively, called sub-
agency, or represent both the buyer and seller in a dual-agency situation. California requires agents to disclose all
possible agency relationships before they enter into a residential real estate transaction.
How much will I spend on maintenance expenses?
Experts generally agree that you can plan on annually spend 1 percent of the purchase price of your house on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of homeownership - perhaps less on a newer home.
What can I afford?
Most lenders will be happy to roughly calculate what you can afford and pre-qualify you for a loan. The price you can afford to pay for a home will depend on six factors:
1. gross income
2. the amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
3. your outstanding debts
4. your credit history
5. the type of mortgage you select
6. current interest rates
What is the standard debt-to-income ratio?
A standard ratio used by lenders limits the mortgage payment to about 28% of the borrower's gross income. The fact that some loan applicants are accustomed to spending 40 percent of their income on rent, and still promptly make the payment each month, has lead some lenders to modify this ration of income-to-debt. Other real estate experts tell borrowers facing rejection to compensate for negative factors by saving up a larger down payment. Before 'shopping' for a home, it's a good idea to get a 'pre-qualification' from a local mortgage broker or bank - you don't want to fall in love with a home you can't afford! A knowledgeable Realtor(R) will often know several you might speak with.
Where do I get information on housing market stats?
A real estate agent is a good source for finding information on the local housing market. For overall housing statistics, U.S. Housing Markets regularly publishes quarterly reports on home building and home buying.
What is Fannie Mae's low-down program?
Fannie Mae is expanding the availability of low-down-payment loans in an effort to help more people nationwide qualify for a mortgage. Two new programs will help potential buyers overcome two of the most common obstacles to home ownership, low savings and a modest income. To address many first-time buyers' struggles to save the down payment, Fannie Mae developed Fannie 97. The program provides 97 percent financing on a fixed-rate mortgage with either a 25- or 30-year loan term through Fannie Mae's Community Home Buyers Program. Fannie Mae's new Start-Up Mortgage will assist buyers with a 5 percent down payment who are at any income level. Yet applicants do not need as much income to qualify and less cash for closing than with traditional mortgages. Borrowers will receive a 30-year, fixed-rate mortgage with a first-year monthly payment that is lower than the standard fixed-rate loan. Freddie Mac, Fannie Mae's counterpart, also offers low-down-payment loan programs.
How long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. Some lenders will consider an borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.
How do you determine the value of a troubled property?
Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected. It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition. It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder's and assessor's offices, or through Internet sites specializing in property records.