Showing posts with label new buyers. Show all posts
Showing posts with label new buyers. Show all posts
Friday, January 25, 2013
Saturday, April 9, 2011
The Numbers on Buying a House
April 7, 2011 from Realty Times
The Numbers on Buying a House by Carla Hill
It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.
Here is a list of items to consider before settling on a budget.
1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!
The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.
2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.
3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.
And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.
New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."
How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.
The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.
4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.
5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.
Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.
6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!
Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.
Copyright © 2011 Realty Times. All Rights Reserved.
The Numbers on Buying a House by Carla Hill
It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.
Here is a list of items to consider before settling on a budget.
1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!
The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.
2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.
3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.
And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.
New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."
How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.
The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.
4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.
5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.
Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.
6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!
Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.
Copyright © 2011 Realty Times. All Rights Reserved.
Wednesday, November 17, 2010
10 Tips For New Buyers
November 17, 2010
10 Tips For New Buyers by Carla Hill
It is a great time to buy for many would-be homeowners. The market offers historically low interest rates, as well as affordable home prices.
Here are 10 steps that buyers can take to make home dreams a reality!
1. Savings. You may already know how much monthly payment you can support (experts recommend no more than 1/3 your monthly income), but the buying process will also include upfront costs, such as a downpayment and closing costs.
2. Downpayment options. Do you qualify for downpayment assistance programs? Will you be able to get an FHA loan and pay 3.5 percent down? Do you have a relative that would like to make a downpayment gift? Many financial experts recommend a downpayment of 20 percent, so be sure to explore your options!
3. Check Credit Report. Your credit report says a lot about you. Lenders use it to evaluate your risk potential and to inform themselves on how responsible of a borrower you are. They use this report and subsequent score to figure your interest rate. The more stellar your report, the better your score and thus lower your rate. Be sure to check your report for accuracy, and report any errors to the credit reporting agencies.
4. Get Preapproved. It's time to talk to a lender! Pre-approval will give you a ballpark figure of how much the bank would be willing to lend you. Are you looking for a $100,000 house or a $300,000?
5. Get Prequalified. This is the official letter from the lender that says they will be willing to lend you money. Many sellers look for buyers who are prequalified.
6. Affordability. The bank may tell you that you can afford a home worth $300,000. This does not mean you want to borrow to your max. A more modest home may fit better in your financial plans.
7. Housing Criteria. You have a budget, now develop a list of what you need and want. This can include anything from "must have 3 bedrooms" to "hardwoods" or "granite".
8. Neighborhood choice. Location strongly affects prices. A 3,000 square foot home in rural Kansas costs a fraction of one in New York City. Decide what neighborhoods and areas are the best fit for you. This will help narrow your home search.
9. Hire an agent. An agent can help you navigate the entire process from searching, putting in offers, to where to hire an inspector or general contractors.
10. Start the search! The MLS is a wonderful place to begin your search. Eighty-four percent of buyers now start their search online, so you'll be in good company.
Copyright © 2010 Realty Times. All Rights Reserved.
10 Tips For New Buyers by Carla Hill
It is a great time to buy for many would-be homeowners. The market offers historically low interest rates, as well as affordable home prices.
Here are 10 steps that buyers can take to make home dreams a reality!
1. Savings. You may already know how much monthly payment you can support (experts recommend no more than 1/3 your monthly income), but the buying process will also include upfront costs, such as a downpayment and closing costs.
2. Downpayment options. Do you qualify for downpayment assistance programs? Will you be able to get an FHA loan and pay 3.5 percent down? Do you have a relative that would like to make a downpayment gift? Many financial experts recommend a downpayment of 20 percent, so be sure to explore your options!
3. Check Credit Report. Your credit report says a lot about you. Lenders use it to evaluate your risk potential and to inform themselves on how responsible of a borrower you are. They use this report and subsequent score to figure your interest rate. The more stellar your report, the better your score and thus lower your rate. Be sure to check your report for accuracy, and report any errors to the credit reporting agencies.
4. Get Preapproved. It's time to talk to a lender! Pre-approval will give you a ballpark figure of how much the bank would be willing to lend you. Are you looking for a $100,000 house or a $300,000?
5. Get Prequalified. This is the official letter from the lender that says they will be willing to lend you money. Many sellers look for buyers who are prequalified.
6. Affordability. The bank may tell you that you can afford a home worth $300,000. This does not mean you want to borrow to your max. A more modest home may fit better in your financial plans.
7. Housing Criteria. You have a budget, now develop a list of what you need and want. This can include anything from "must have 3 bedrooms" to "hardwoods" or "granite".
8. Neighborhood choice. Location strongly affects prices. A 3,000 square foot home in rural Kansas costs a fraction of one in New York City. Decide what neighborhoods and areas are the best fit for you. This will help narrow your home search.
9. Hire an agent. An agent can help you navigate the entire process from searching, putting in offers, to where to hire an inspector or general contractors.
10. Start the search! The MLS is a wonderful place to begin your search. Eighty-four percent of buyers now start their search online, so you'll be in good company.
Copyright © 2010 Realty Times. All Rights Reserved.
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