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Mortgage - Are You Financially Ready to Buy a Home? Throughout United States there are thousands of people looking to buy a home, either now or in the near future. Interest rates for the past several years have been low including continue to remain reasonable, thus making it more affordable to buy a home. Taking into account the real estate market, competition among lenders, including low interest rates it might make more sense to buy than rent. One pertaining to the most important criteria to look at at the time preparing to buy a home is your debt to income ratio. Simply put, your debt to income ratio states the percentage of your income which is going towards your debt. Mortgage lenders could use the information in conjunction with other criteria to qualify you for a home mortgage. Depending on the type of mortgage loan you get; conventional, FHA, or VA, just to name a few, the debt to income ratio may vary. For the purpose of the article let us look at conventional mortgage loans. at the time applying for a mortgage loan you may see a 28/36 qualifying ratio. What the says is that a max of 28% of your total gross monthly income might go towards housing expenses. the includes your mortgage payment, property tax, association fees, insurances, etc. For example: Yearly gross income = $56,000 / Divided by 12 = $4,666.67 monthly gross income $4,666.67 monthly gross income x .28 = $1,306.67 allowed for housing expenses The second part pertaining to the qualifying ratio is a 36. the number represents the maximum percent of debt that a lender could generally allow for both housing expenses including recurring monthly debt. In general, the includes all your housing expenses plus credit card payments, car payments, student loan payments, etc For example: (using the information from the above example) $4,666.67 monthly gross income x .36 = $1,680 allowed for recurring debt including housing expenses Don’t obtain discouraged if you don’t quite meet the above criteria. There are many options available at the time applying for a home mortgage. The amount of a down payment you might afford is another important aspect of buying a home. Typically, lenders look for 20% pertaining to the purchase price. Depending on the cost pertaining to the home you wish to purchase the tends to be a lot of money. Again, don’t obtain discouraged. There are many types of mortgage loans available including some of those include zero down options. One last thing to consider at the time buying a home is the closing costs. By talking with a mortgage lender you might obtain a particular estimate on how much these costs could be. You may additionally be able to negotiate with the seller through a real estate agent the amount of closing costs you could be responsible for. Some sellers are motivated to sell their home including could assist the buyer in paying the closing costs. When buying a home you should always obtain pre-approved for a home mortgage before you begin looking at homes. Getting pre-approved helps in many ways but the most important is that it sets the price pertaining to the amount of home you might afford on your current budget.
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