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Wondering How Much Mortgage You Can Afford? Here’s How to Calculate It

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Wondering How Much Mortgage You Can Afford? Here's How to Calculate ItMany people are aware of the financial commitment that is involved when investing in a home, but what that amounts to is different for every person. From what you can afford to what a lender will allow, there are plenty of details involved in determining the right home for you. If you’re not quite sure what the right price is, here’s how to approach home ownership and determine your debt-to-income.

Calculating Your Debt-To-Income Ratio

You may not know what your DTI ratio is, but it has a lot to with how much home you can afford. In order to calculate this amount, add together all the debts you owe each month and divide them by your monthly pre-tax income. For example, if your credit card is $150 and your rent is $900, your debt amount would be $1050. Divide this amount by your income, say $2500, to get 0.42. This means your DTI ratio is 0.42 or 42%.

What Your DTI Means

While a DTI in the high 20s or low 30s is good, anything that hovers above 43 percent may serve as a red flag to the lender. The lower your DTI ratio is, the more likely it is that a lender will approve your mortgage application since you’ll have the disposable income to deal with financial hurdles. If your dream home has you hovering close to this amount, it may be a sign that it’s a bit out of reach.

How Do You Want To Live?

It’s quite common to be taken over when you find your dream home and decide to commit. However, buying a home is a huge financial commitment, and if you’re buying more than you can afford it may drain your well-being over time. Instead of diving in, determine other expenses that are likely to come up in the next few years, whether it’s travel, a child or a new car. It’s important to have the home you want and budget when buying it, but you’ll still need to financial wiggle room in case something comes up.

There are a lot of factors involved in determining how much house you can afford, but by calculating your DTI ratio and being aware of your spending plans, you’ll be well on your way to an ideal price range.

What’s Ahead For Mortgage Rates This Week – January 17, 2017

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Last week’s economic reports included readings on job openings, retail sales and consumer sentiment in addition to weekly reports on new jobless claims and Freddie Mac’s survey of mortgage rates.

Job Openings Hold Steady in November; Quits and Hires Increase

According to the Labor Department, job openings held steady with a reading of 5.50 million openings in November, which matched October’s reading. Hires and quits showed more activity, which analysts deemed a healthy sign for the economy. Workers typically hold on to their current jobs in times of economic uncertainty, while they may be more comfortable with changing jobs in a strong economy. Increased “churn” in terms of quits and hires suggests that workers are gaining confidence in economic conditions and are more willing to change jobs. There were 1.3 unemployed workers for each job opening, which was lower than October’s reading of 1.4 unemployed workers for each job opening.

Retail Sales Higher in December

Retail sales grew by 0.60 percent in December, although analysts had expected o.80 percent growth. November’s reading showed 0.20 percent growth. Retail sales not including the automotive sector grew by 0.20 percent. Analysts had expected a reading of 0.50 percent based on November’s reading of 0.30 percent growth. Year-end promotions and incentives offered by auto dealers likely contributed to December’s increase in retail sales.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week; the average rate for a 30-year fixed rate mortgage fell by eight basis points to 4.12 percent. 15-year fixed mortgage rates averaged seven basis points lower at 3.37 percent. Rates for 5/1 adjustable rate mortgages were 10 basis points lower at an average of 3.23 percent. Discount points averaged   0.50 percent for all three mortgage types.

New jobless claims were lower than expected last week with a reading of 247,000 new jobless claims. 258,000 new claims were expected based on the prior week’s reading of 237,000 new claims filed. New jobless claims were lower than 300,000 new claims for the 97th consecutive week. The rise in new claims last week was attributed to delays in filing for benefits between Christmas and New Year holidays.

Consumer sentiment dipped in January to an index reading of 98.1 as compared to December’s reading of 98.2 and the expected reading of 98.8.

What‘s Ahead

This week’s scheduled economic releases include the National Association of Home Builders Housing Market Index. Commerce Department readings on housing starts and building permits will be released. Consumer Price Index readings are scheduled along with weekly reports on mortgage rates and new jobless claims.

Understanding the Reverse Mortgage and How to Use It to Pay Off a Regular Mortgage

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Understanding the Reverse Mortgage and How to Use It to Pay Off a Regular MortgageThere are a variety of mortgage products out there that serve the needs of different homeowners, but for the uninitiated it can be hard to know what will work best for them. If you happen to be close to retirement and are looking at options that will be more financially beneficial for you, here are the details on a reverse mortgage and how this product can work for you.

The Details On A Reverse Mortgage

A reverse mortgage may be one of the lesser-known products available on the market, but it was created in 2009 as the Home Equity Conversion Mortgage for Purchase (HECM) following the 2008 recession. While this type of mortgage is only available to homeowners who are 62 or older, it offers a way for people to tap into the equity of their home so that they are not required to pay monthly mortgage payments. There are limitations imposed on this product, but this can be useful for many homeowners.

What’s Required To Apply?

In order to utilize this mortgage product, the homeowner must have paid off their property entirely or have a significant amount of equity in their current home. As people who want to use a reverse mortgage will have to go through a credit check, they will have to be able to prove that they have the ability to pay for all the fees associated with home ownership. This can include common expenses like insurance, property tax and any other applicable charges that come with a monthly mortgage payment.

How You Can Use It

A reverse mortgage can be confusing to understand, but for those who want to receive monthly payments, get a lump sum payment from their equity or even access a line of credit, it can be a means of tapping into additional funds. While this means that the overall loan balance of the mortgage can increase over time due to interest and insurance not being paid consistently, these expenses will be taken care of once the owner has passed away when the property can be sold or the loan balance is paid.

A reverse mortgage can be a beneficial product for many homeowners, but it’s important to be aware of the associated costs involved to determine if this product is beneficial for you. 

Buying Real Estate vs. Buying Stocks: Here’s Why a Home Should Be Your Priority

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Buying Real Estate vs. Buying Stocks: Here's Why a Home Should Be Your PriorityOnce you’re done with debt and you’ve started to save, it’s commonly the case that you’ll start hearing about the risks and rewards of investing in stocks or real estate. Unfortunately, it can be difficult for many people to know what type of investment is going to work better for them down the road. If you’re currently considering what you should put your money into, here are some reasons you may want to turn to real estate.

It’s Something You Can See

While investing in the stock market will give you the ability to invest as little or as much as you want, a home will take a monthly payment and a down payment in order to make the deal. Fortunately, this means that you’ll be investing money every month into something that belongs to you and that you can see. A home is not only something you can invest in all the time, it will enable you to avoid putting money into rent that you’ll never get back.

Saving Money On Tax Breaks

There may be a certain amount of volatility with any market investment, but when it comes to buying a home you also have the benefit of tax breaks that are designed specifically for homeowners. In addition to the ability to deduct interest on your main residence if you’ve lived in your property for a minimum of two of the last five years, you’ll also be able to sell it tax-free. Investing in a home certainly takes savings, but there are many available tax benefits that can save money.

A Sense Of Security

Many people want to invest in a home because it offers up a piece of something that they can really own. However, another appealing aspect of having a home is that you’ll be removed from the day-to-day rumblings of the stock market. Investing can make people more than a little weary, even if they’re knowledgeable about the markets, and this can cause people to sell off and lose money when the going gets tough.

Investing in real estate and the stock market both involve some degree of financial risk, but you might not be aware that there are several added benefits of buying a home. From the tax break incentives to the sense of security, real estate can often be the better financial route to take. If you’re currently considering a home, contact one of our real estate professionals for more information.

The Pros and Cons of ‘Mortgage Before Marriage’ for Young Couples

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The Pros and Cons of There was a time when a higher percentage of people were married before they committed to buying a home together, but it’s a lot more common to co-habit and invest in a home together. If you’re considering the commitment of a mortgage without being married, here are some things to be aware of before you start searching the market.

Relationship Status Won’t Affect Your Rates

It might seem like there are greater risks involved if two individuals purchasing a property are not legally bound, but it actually makes no difference to the mortgage lender. If two people are buying a home together, the lender is going to be assessing their credibility based on their individual credit reports and financial history, not on their relationship to each other. While it may seem like co-habiting will have an impact, the proof as far as lenders are concerned is in the numbers.

What’s Your Credit History?

Most people are aware of their credit history, whether they’ve had financial hiccups in the past or are still paying off a significant amount of debt. However, it is more difficult for some to know the financial background of their partner, and this can be more common when it comes to co-habiting. Because the lender will be looking at both credit scores, if you or your partner have had financial issues in the past, it can have an adverse impact on your application. While you may have a nearly perfect credit history, if your partner does not this can make mortgage approval more difficult.

In The Event Of Separation

Home ownership can involve significant hurdles after a divorce, but there will still be some legal and financial issues to wade through if you’ve never been married. Since it’s likely that you won’t want to continue to co-habit, there’s the possibility that one party will have to buy the other out, which can be a sizeable financial burden. While this type of situation may never come to fruition, it’s important to be aware of what might occur so you can be prepared.

There can be a lot of complexities involved in co-habiting whether you’re married or not, but it’s important to have an awareness of your partner’s financial history and be prepared for financial hurdles.

Considering a Spring Home Sale? Learn How to Appraise Your Selling Chances Like a Pro

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Considering a Spring Home Sale? Learn How to Appraise Your Selling Chances Like a ProThe springtime is known to be one of the best times to put your home up for sale. However, if you’re not necessarily planning on engaging a real estate agent, it’s important to be prepared for all of the hard work involved in putting your home up for sale. Whether you’re new to the market or you’ve never sold a home on your own before, here are some questions to ask yourself so you’re prepared for selling in the coming season.

Do You Know The Market?

The neighborhood you live in and the buying market you’re dealing with are important factors in how your home is going to sell, so you’ll need to know a little about both when determining your ideal price. By looking through the listings in the area and seeing what homes like yours have sold for, you may be able to give yourself a range for the offers you can expect.

How Will You Sell It?

One of the added benefits of social media is that you can use sites like Facebook and Twitter to announce your home sale and even highlight its best features. While this may make selling seem much easier, you’ll still need to make sure you have good photography that captures your home and a website where homebuyers can learn more details. Be aware that while these items may seem easy enough, it can take a lot of time to manage these details on your own.

Are You Prepared To Negotiate?

It’s a good feeling to get an offer on your home, but in all likelihood it will be less than what you’re expecting and this means engaging in the art of negotiation. According to the National Association of Realtors, those who sell their home generally get 10-20% less than those who utilize an agent, so it’s important to be comfortable negotiating before you dive in. If you’re confident in your acumen, you may want to go it alone, but if you have doubts, it can be a better financial decision to engage the help of an agent.

Before you decide to sell your home on your own, it’s worth appraising your skills to determine if it will be worth the time and effort you’ll have to put in. If you’ve come to the conclusion that you’d like to utilize an agent after all, contact one of our real estate professionals for more information.