How much home can I afford?

How Much Home Can You Afford?

The single most important part of buying a house is figuring out how much you can realistically afford to pay.You'll have to take a good look at your budget, debts, credit reports, and credit score. Once you have a good picture of your financial status, start saving as much money as you can for a down payment, closing costs and other extra expenses that come along with buying a house. Extra expenses could include paying for a home inspection (around $300 - $500 depending on where you live) or hiring a moving company after the sale is final.

Depending on the condition of your finances -- if you have a lot of debt, errors on your credit report, or a low credit score -- getting ready financially could take six to 12 months or more! If your credit score falls below 620, lenders may see you as a risky borrower. This might mean you can only qualify for a sub prime mortgage (one with a higher interest rate). It might be worth your time to take a year and work on building a better credit report before taking on the responsibility of a mortgage. Also, if you qualify for a lower interest rate you could save thousands of dollars over the life of the loan. Be wary of companies that offer to repair your credit for a fee.

Determining a Mortgage You Can Live With

There are a few basic formulas commonly used by lenders to determine how much of a mortgage you can reasonably afford. These formulas are called qualifying ratios because they estimate the amount of money you should spend on mortgage payments in relation to your income and other expenses. It is important to remember that these ratios may vary from lender to lender and each application is handled on an individual basis, so the guidelines are just that - guidelines.

Generally speaking, to qualify for conventional loans, housing expenses should not exceed 26 to 28 percent of your gross monthly income. Monthly housing costs include the mortgage principal, interest, taxes and insurance. For example, if your annual income is $30,000, your gross monthly income is $2,500, and $2,500 x 28 percent = $700. So you would probably qualify for a conventional home loan that requires monthly payments of $700.

IT IS IMPORTANT THAT YOU SELECT A HOME THAT WILL MEET YOUR FAMILY'S NEEDS AND KEEP YOU HAPPY FOR YEARS TO COME.

When budgeting to buy a home, it is important to allow enough money for additional expenses such as maintenance and utilities. If you are purchasing an existing home, gather utility cost averages and maintenance costs from previous owners or tenants to help you better prepare for homeownership.

Generally speaking, if your finances are in decent shape, you could look for a home priced at two to three times your gross yearly salary. And while using mortgage calculators can give you a rough idea of how large of a mortgage you might qualify for, talking to a lender or mortgage broker in person will give you a more accurate figure.

Avoid Financial Pitfalls

When you buy a house, you enter into a long-term financial obligation. You fill out papers and sign legal documents based on those papers. It's important that you understand your responsibilities so that you won't be a victim, or a participant, in a fraud.

When you apply for a mortgage loan, every piece of information you submit must be accurate and complete. Anything less is considered loan fraud.

Unfortunately, there are people who may try to convince you to lie about your qualifications so that they can illegally make money at your expense. These people will appear to be your friends, saying that they're trying to help you. They may downplay or deny the importance of complying with the law and suggest that it's all just "red tape" that everyone ignores. Don't allow yourself to be fooled.

Be Smart

Before you sign anything, read and make sure you understand it.

Refuse to sign any blank documents.

Accurately report your income, your employment, your assets, & your debts.

Don't buy property or borrow money for someone else.

Disclosure of loan terms is not just a formality.

It's the law and you have the right to know.

Be Honest

Don't change your income tax returns for any reason.

Tell the whole truth about money gifts.

Don't list fake co-borrowers on your loan application.

Be truthful about your credit problems, past and present.

Be honest about your intention to occupy the house.

Don't provide false supporting documentation.

Don't Be Discouraged

If your loan application is rejected, find out what the problem is and how it can be resolved. Maybe you need to look for a less expensive house, or save more money. Check to see if there are any affordable housing and community programs you might be eligible for to help you through your home buying process.



Aside from being US presidents, what else do George Washington, Thomas Jefferson, Abraham
Lincoln and Teddy Roosevelt have in common?

They are the four faces
carved on Mt. Rushmore!

Protection against bank failure

The Mortgage Market View...

The Low Down on FDIC Insurance After last month's failure of California-based IndyMac Bank, many people have wondered how safe their accounts really are. While the Federal Deposit Insurance Corp. (FDIC) guarantees most bank deposits, here are some important details to remember. What types of accounts are covered? The FDIC protects checking and savings accounts, certificates of deposits (CDs), Christmas club accounts, and money-market savings accounts. However, Stocks, Bonds, and mutual fund shares...even those purchased through an FDIC bank...are not protected. What are the limits of FDIC insurance? Bank accounts that have less than $100,000 in them and certain retirement accounts (IRAs held in CDs and money market accounts) that have less than $250,000 are fully protected by the FDIC even if the bank fails. If you want to exceed these account limits, you can keep your deposits fully protected by:

1. Dividing your money among several different bank companies. Note that dividing your money among several different branches of the same bank does not guarantee full protection.

2. If you prefer to keep your money in the same bank company, you can still be fully protected if you divide your money among various "ownership categories". Ownership categories include a personal account in your name, a personal account in your spouse's name, a joint account co-owned by you and someone else, and a trust account that names someone other than you as a beneficiary.

What are some common ways customers end up with uncovered deposits? If you purchase a CD through an investment broker, this CD will often be placed with a bank at which you already have an account. If the CD and your other accounts exceed the $100,000 limit, you may not be full protected. Before purchasing CD's through a broker, ask where they will be placed. In addition, keep track of the interest your accounts earn so you don't exceed the limits this way. What will happen if your bank fails? In most cases, depositors can fully access their funds by the next business day. Typically, failed banks are closed on Fridays, and funds are available by the following Monday. People can also usually use their ATM cards and write checks over that weekend as well. And for customers whose accounts exceeded the FDIC limit, all hope is not lost. Though this amount has varied, they can generally expect to recover 70 cents on the dollar of their uncovered funds after the bank's assets are sold. The good news is that the vast majority of US banks are secure, but the above information will help you stay fully protected.

For more information, visit www.fdic.gov.

Thanks to Genavee Hayden for the above info.

Bye Bye Summer

Need a great direct lender? Ask me for referrals.

For the Month of August 2008 ---
IN THIS ISSUE...

Panting Like a Dog in August! Summer's on its way out... but before it leaves, it's sure to blast us with its rays of sun and those endless blue skies. That means, families and friends across the country will be getting in their last minute vacations and barbeques--while trying to beat the heat. The articles below can help you make the most out of the last month of summer. The first article describes how you can stay cool while still saving on cooling costs. And for all those cookouts, barbeques, and get-togethers make sure you follow some simple tips for summer food safety. Finally, if you're planning a last-minute getaway before summer fizzles out, you'll want to follow the advice on where to send your mail while you're gone. As always, please forward these tips on to your friends, coworkers and family members to help them make the most of their last month of summer. And if you need any help or advice, please call or email any time.

SAVE ON COOLING COSTS

Heating and air conditioning usually represent the biggest portion of home energy bills. As we head into the hottest part of the year, here are some ideas from author and home improvement expert Don Vandervort that will help you stay cool...and save money in the long run: Get 'In the Zone': Creating heating and cooling zones that let parts of your house become warmer and cooler than other parts is a great way to save both energy and money. If your home has a ducted system and wasn't originally designed with a zone system in mind, you can have a professional install a series of motorized dampers in certain ducts that will create a zone effect. Install Room Air-Conditioning Units: If your family spends a majority of time in one room or area of your home, like the family room or TV room, you can install a window unit or portable unit in that room and use that unit for part of the day instead of turning on your central air conditioning. You can always turn your central air conditioner on for those times of the day when your family is dispersed throughout the house. Install Ceiling Fans: The latest technology means that ceiling fans achieve better air circulation and can now help you save as much as 30% on your energy bill. Be sure to look for the Energy Star designation for energy efficiency. Inspect Your Ductwork: Recent research has shown that central heating and cooling systems that use ductwork can lose as much as 50% of their energy through leaks. It is important to have your ductwork inspected by a contractor every three years to make sure your system is operating at maximum efficiency. Install Heat-Recovery Ventilators (HRVs): Not only do HRVs get rid of air contaminants like odors, dust, and mold, they also grab much of the cold or heat from the outgoing air and recycle it back into your home with the incoming fresh air. These units are especially helpful if your home is tightly sealed. For even more great home tips and ways to save this summer season, visit http://www.hometips.com/.

SUMMER FOOD SAFETY TIPS

Summer time is one of the best times of year to enjoy fresh fruits and vegetables, especially those that aren't available year-round. But recent salmonella outbreaks are an important reminder about handling food properly. The Centers for Disease Control (CDC) notes that there is no way for consumers to detect salmonella since it can't be smelled, tasted, or seen. Here's what they recommend to reduce the risk of exposure: Wash, Wash, Wash One of the best ways to protect yourself is to wash all produce, including organic produce, with cold running water. You should scrub your produce gently with a vegetable brush, or you can use your hands if you don't have a brush. Make sure you remove outer layers of cabbage and lettuce. And make sure you wash fruit, too, even if you don't eat the peel. In addition, wash your hands with soap and water before handling food and also wash cutting boards, counters, and utensils to avoid cross-contamination. When you are preparing fresh vegetables, make sure you avoid any kind of contact with raw meat. And don't forget to refrigerate sliced up fruits and vegetables. Make the Call Salmonella poisoning typically resembles the flu, and symptoms usually appear 12 to 72 hours after infection and include abdominal cramps, headache, fever, diarrhea, nausea, and vomiting. If you suspect that you've contracted a case of salmonella poisoning, call your local health department. Reported cases help the CDC and FDA track the source of salmonella. Learn More To stay informed on the latest information, visit the CDC's web pages on salmonella and salmonella outbreaks.

WHERE DOES YOUR MAIL GO WHEN YOU'RE AWAY?

Think about what lands in your mailbox...bank statements, credit card bills, and maybe even DVD's. Where do they all go when you're gone? If you've been asking a nosy neighbor to pick up your mail--or worse, letting your mail pile up in the box--there's a better option and it's easier than ever! Whether you're on vacation or an unexpected business trip, you can rest easy knowing your mail is safe and sound by asking the Post Office to suspend delivery while you're gone. They'll hold your mail from 3 to 30 days, and then resume normal delivery on the date you specify. It's convenient, easy to do, and most of all SAFE! Make It Easier with the Internet Now you can notify the Post Office to hold your mail in two minutes flat without even leaving your house. Just hit this link, and you can quickly fill out the form online: USPS Mail Hold. If your area isn't served online, simply call 1 800 ASK USPS (1 800 275 8777) and a representative can assist you. Then, have the time of your life...without worrying about your mail while you're gone!


The material contained in this newsletter has been prepared by an independent third-party provider. (Genavee Hayden, Countrywide Home Loans) The material provided is for informational and educational purposes only and should not be construed as investment, financial, real estate and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.

What is a CMA?

Long Realty Company
Can a Comparative Market Analysis Help You?
To get the most accurate estimate of how much you should list your property for, your real estate agent can provide you with a Comparative Market Analysis (CMA). A CMA is an informal estimate of market value, based on sales of comparable properties in your area. It generally takes into account various aspects of your home, including size, features and annual costs.
Reviewing comparable homes that have sold within the past year, along with the listing or asking price on current homes for sale, should help you determine a fair sale price for your property. CMAs can include homes that are currently for sale and those which have recently sold. They can cover areas as narrow as one or two streets surrounding your home, or as broad as an entire subdivision. Most real estate agents will give you a CMA for free, hoping you'll list your home with them.
Each CMA contains valuable information on several recent sales, including: How long each property stayed on the market How close the sale price was to the asking price Notes comparing each home to yours, i.e.; number of bedrooms and baths, approximate square footage, sizes of major rooms, amenities such as fireplaces and pools, age of the home, property taxes and more.
The CMA is an informative selling tool, but like any tool, it doesn't work by itself. For this reason, the CMA will always need to be interpreted by a professional or with complete objectivity by the seller or buyer. Remember, too, that the CMA is also a buying tool; it is consid- ered just as seriously by the buyer and his or her agent. As you and your agent are going to use the CMA to ask the highest possible price for your home, the buyer is going to use it to find reasons to either choose or eliminate your home, and to arrive at the lowest price possible.
Important Questions to Ask an Agent Before Listing Your Home for Sale
Do you have an active real estate license in good standing? How long have you been licensed as an agent? Why do you think I should list with you? What professional designations do you hold? What party will you represent -- the buyer or the seller? What services do you offer? Do you belong to an online homebuyer's search service? Have you listed or sold in my neighborhood lately? How will you price my home? How will you market my home? How will you keep in contact with me during the selling process, and how often? What is your fee? Will you cooperate with buyers' brokers? What share of commission will you offer a cooperating broker who finds the buyer? What awards have you won? Important Questions to Ask Yourself About the Agent Is the agent a good listener? Is the agent accessible? Is the agent part-time or full-time? Is the agent cooperative and enthusiastic, or rude and arrogant? Do you think you can have a good working relationship with the agent?

Sellers: Protect yourself and your home Never allow random house-hunters into your home unescorted. A serious buyer will be working with a real estate professional or should be willing to contact your agent to schedule an appointment. Also, always lock your valuables away before an open house - the agent onsite will be monitoring traffic, but it's impossible to be everywhere at all times.
The Trivia Block
A jiffy is an actual unit of time for 1/100th of a second. Thus the saying, I will be there in a jiffy!

Welcome

Welcome to my blog where you will find lots of practical information and news that explains what is happening locally and nationally in real estate and related areas. I hope you will find some information that is useful and if you want to see something I haven't posted, feel free to make a suggestion.