September 2013

Housing and Debt Ratios: How Large of a Mortgage Do You Qualify For?

Ratios are a big factor in the size of the mortgage you qualify for. There are actually 2 ratios we look at. The first, the housing ratio, is a measure of your total housing cost compared to your monthly income. The housing figure includes all the normal monthly costs of owning a home: the principal and interest payment, the monthly taxes and insurance, mortgage insurance, and the association fee if it’s a condo or townhouse (we’ll get into this more, later). The second ratio is the total expense ratio. This measure includes not only your housing expenses, but all your other monthly debts, too. So this takes into account all your minimum credit card payments, car payments, student loans, any alimony or child support, and the like. (There are some obligations that you are required to pay, things like car insurance and day care for children, that don’t count in…

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Proving Income Stability When Applying for a Mortgage

When people are trying to figure out how much they can afford, Income Stability this one area where it’s easy to get bad information. First we need to determine how much you make each month. We use gross income, not your take home pay.  If you’re in a job where you get the same amount of pay each month, it’s pretty simple. But if you have a job where your income fluctuates from month to month, like commissioned sales or construction, or if part of your pay comes from bonuses, it gets more complicated. The same thing applies if you are self-employed or have your own business. In these cases we need to go back and look at the history of your income over the last two years and make sure that this income is likely to continue. In any event, lenders look more favorably on someone who has been…

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Preparing to Buy: Dealing with Credit Problems

So what happens if your credit isn’t the best? If you’ve had major credit problems in the past, or if there is inaccurate information on your report, this may affect your ability to buy. Your situation depends on what the problem was, and how long ago it occurred. If the problem was from years ago, you might be surprised at what we can do. But even if it’s a more current problem, there are options. FHA, a government program, is more lenient of past credit mistakes, and can be a great option for many situations. We’ll discuss this in more detail later. It also depends on the specific circumstances of your situation.  Many people think that after a bankruptcy, for example, they won’t be able to buy a home again. But depending on the causes, you may be able to buy, at good rates, as soon as two years after…

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