For many people, buying a home is the single biggest investment they will make in a lifetime.
The so-called “right time” is different for everyone. Before making a decision to buy a home, ask me to help you answer the following questions.
CAN YOU QUALIFY FOR A MORTGAGE?
The best way to determine this is to figure out your debt-to-income ratio. As an example, if a loan program uses a 28/36 qualifying ratio, it means the homebuyer is allowed to spend no more than 28% of his or her gross income on monthly mortgage payments and no more than 36% on total debt. Total debt includes car and school loans, credit cards, child support and alimony. More specifically, if an individual earns $60,000 per year, his or her monthly gross income is $5,000. Under the 28/36 guidelines, that person’s maximum monthly mortgage payment should not exceed $1,400 while his or her total monthly debt should not exceed $1,800.
HOW MUCH HOME CAN YOU AFFORD?
Commonly paid in cash, down payments are based on a percentage of the home’s selling price and are due at closing. If you are able to make a down payment of 20% or more, you can save money — between $20 to more than $100 a month — and avoid the cost of mortgage insurance. If you don’t have 20% to put down on a home, remember that there are other options out there. Many affordable mortgage programs exist, including a few that require little or no down payment. Additionally, zero down payment programs are available for some veterans, active-duty military personnel and reservists.
HOW’S YOUR CREDIT?
All lenders require a credit report that contains personal financial information such as loan payment information, bank and credit card accounts, and more. You are able to obtain a copy of yours by contacting any one of the credit bureaus throughout the United States.