Buying a Property

AVOIDING COSTLY BUYING MISTAKES!

Here are some tips about buying a home. Saving time, money and trouble.

  1. 1. Plan ahead!
    Make sure to establish good credit. Save as much as you can to be able to afford the down payment and for the costs associated with closing on your future home.
  2. 2. Get approved in advance before you start looking.
    Home sellers prefer working with buyers who are pre-qualified. Being pre-approved will enhance your negotiating power and will give you an advantage over homebuyers who are not pre-approved for a mortgage.
  3. 3. Set your budget and stick to it.
  4. 4. Knowing what you want in your future home.
    Ask yourself how long you will live there, will you expect your family to grow? Consider schools and the daily commute between work and home. Make sure you consider every angle before you dive into the adventure of buying your new home.
  5. 5.How Much House Can I Really Afford?
    How big of a house you can afford depends on how much cash you will be able to put down. There are two rules of thumb how much a creditor will lend you.
  6. 6. As a self-employed employed
    As a self-employed employed home buyer you can afford a home purchase that is up to 2 ½ times your yearly adjusted gross income plus any items allowed to be added back or deducted.
  7. 7. If you are not self-employed
    If you are not self-employed you may afford a home that is up to 2 ½ times based on your gross yearly income.
  8. 8. Your monthly payments
    Your monthly payments (interest and principal) should be 1/3 of your take home pay or ¼ of your gross pay.
  9. 9. How much cash will you need for down payment and closing cost?
    Of course, generally speaking, the more money you have to put down, the lower your mortgage will be. Depending on the loan you can put as little as 3% down, but you will have a higher interest rate. Anything below than 20% down will require you to pay for a Private Mortgage Insurance (PMI) which will protect the lender should you have difficulties to make your mortgage payments. Expect to pay 3% to 6% of the loan amount in closing costs. The closing cost are fees required to close a loan including insurance, title fees, inspections and points. You can ask the seller to pay some of the closing costs, in which case the mortgage company simply adds that amount to the price of the home purchase and it gets financed with the mortgage. The lender may require you to have two month’s of mortgage payments in your savings account when you apply for the loan.
  10. 10. How much can you borrow?
    Any lender will look at your income and your existing debt when evaluating your application. Lenders use the following two ratios as guidelines.
  11. 11. Housing Expense Ratio
    Your monthly PITI payment (Principal, Interest, Taxes and Insurance) shouldn’t exceed 28% of your monthly gross income.
  12. 12. Debt To Income Ratio.
    Your long term dead should not exceed 36% of your monthly gross income. (Consider any debt that will take more than 10 months to pay off – mortgages, student loans, alimony, car loans, credit cards and child support).
  13. 13. These are just guidelines
    These are just guidelines and some lenders are not inflexible. However, if you can make a large down payment or if you have been paying rent close to the same amount as the proposed mortgage – the lender may be willing to cut you some slack.
  14. 14. Your offer should be reasonable.
    To determine a fair market value of the home you are interested in, contact us and we will provide you with a FREE market analysis listing all sales prices of homes in that particular neighborhood.
  15. 15. Choose your lender and your loan carefully.
    Consult with your lender before paying off debts as you may qualify even with your existing debt. By not paying off an existing loan you free up more cash for your down payment.
  16. 16. Keep your job.
    If you can expect a career move in your future, try to make this move after your loan has been approved.
  17. 17. Do not create new debt.
    If you increase your debt by financing a new vehicle or other large purchases – this could prevent you from qualifying. Also do not shift money around as a lender needs to qualify all sources of funds. The process is lot easier for anyone involved if you leave everything where it is.
  18. 18. Timing matters.
    If you are already a home owner, you may need to sell your current house to qualify for a new home loan. If you are renting, time your move to the end of your lease agreement.

Buying a Property

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