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Top Ten Things to Know When Buying a House

Owning a home is the American dream but home ownership also comes with many responsibilities and some headaches. Here are the top ten things you should know when buying a house.

First, there’s a high transaction cost associated with buying and selling property and you’ll pay capital gains taxes if you buy a house and live there for less than two years. Even in a roaring real estate market you could end up losing money if you sell your home two years or sooner from the time of your original purchase. Buy a home only if you can commit to staying longer than two years.
Continue reading “Top Ten Things to Know When Buying a House”

In “Buying a House in a Buyer’s Market – Part I,” we explored the importance of timing when it comes to buying a house in a buyer’s market. Finding the right house at the right price should be a buyer’s first and final goal with a long term plan of living there as a means of riding out bad market conditions that can occur. This time we’ll take a look at how technology and an experienced buyer’s agent, negotiating effectively and avoiding gimmicks are also essential when it comes to buying a house in a buyer’s market. Continue reading “Buying a House in a Buyer’s Market Part Two”

With falling housing prices, mortgage rates at all-time lows, millions of houses for sale and anxious sellers, many wonder if now is the best time to buy a house or not. In some cases, sellers aren’t just anxious, they’re down right desperate and with the number of sellers far outnumbering the number of buyers, things aren’t as clear-cut as they seem. In fact, this buyer’s market is complicated. Buy too soon and the figures could reduce by the time a buyer secures his mortgage, resulting in negative equity. Wait too long and someone could buy the house you’ve been eyeing for months out from under you. And you don’t want to get sidetracked by market forces that aren’t under your control either. Here are some strategies for buying a house in a buyer’s market. Continue reading “Buying a House in a Buyer’s Market – Part One”

Qualifying for a mortgage can be a stressful experience, especially if you’re a first-time homebuyer. Many questions have to be answered about income, debts, and other potentially sensitive subjects. While all the questions may seem invasive, there’s no other way for a lender to get the information they need to determine whether you’re a good candidate for a loan. It helps to keep in mind that mortgage lenders have to follow certain lending guidelines that may not make sense to you as a consumer. But these guidelines often help you in the long run.

Determining Household Income

Many couples assume that both incomes have to be included when applying for a mortgage on a home that’s being jointly purchased. However, that’s not the case. There are times when it makes sense to try to qualify using only one person’s income. Here are a few scenarios to consider.

One of you freelances. If one member of the household is a freelancer or does work for clients on a contract basis, it may make sense to exclude that person’s income from the equation. The main reason is that this income is hard to quantify to someone who’s looking for steady paychecks–someone like a mortgage loan officer, for instance. Mortgage lenders need to see regular, predictable income, and most freelancers aren’t able to meet that requirement.

One of you has been laid off. It could be that you started down the path of homeownership, and then one of you was suddenly laid off. This scenario could impact your ability to get a mortgage because one of you no longer has a steady income. In this case, trying to qualify using only the income from the employed spouse is a good choice.

One of you is between jobs. Maybe one of you decided to leave an unfulfilling job for a better situation that hasn’t yet materialized. Or perhaps you have a new job lined up, but it hasn’t started yet. If now is the time that you’ve determined is right to buy a new home, you may need to try qualifying for a mortgage using only the salary of your currently-employed spouse or partner.

One of you has a low credit score. Perhaps one of you made poor financial decisions before you were married, and as a consequence, your credit score took a plunge. This is another instance when applying for a mortgage using only one partner’s income and credit score may be the best option–as long as your debt load is manageable.

Understanding the Debt to Income Ratio

Mortgage lenders have many guidelines they must follow when determining whether to make a loan to a prospective homeowner or not. While some guidelines are federally mandated, others are imposed by the lending entity – the bank, credit union, or mortgage lending company. One of the most important guidelines to keep in mind – and one that many homeowners don’t fully understand – is the debt to income equation. Let’s take a closer look at this key element.

The purpose of the debt to income ratio is to give mortgage lenders the data they need to ensure that you can afford to make a mortgage payment along with your other monthly obligations. If you’re loaded down with credit card payments, student loans, alimony, or child support payments, you may have trouble qualifying for a mortgage. Or you may only be eligible for a small mortgage, which limits the size of home you can afford.

Determining Debt to Income Ratio

Your debt to income ratio shows a mortgage lender how much house you can afford after paying all your current financial obligations each month. Here’s how it works:

  • Total up all your monthly payments. This includes credit cards, housing, cars, personal loans, student loans, and anything else you’re on the hook for each month.
  • Divide the total of your monthly debt by your gross monthly income. The resulting dividend is your debt to income percentage.

Current guidelines for most mortgage lenders dictate that your debt to income must be 43% or lower to obtain a Qualified Mortgage (a specific category of mortgage that is consumer-friendly and easier to obtain for most people). There are other types of mortgages that have more flexible guidelines. Some larger lenders may be willing to take a risk and loan money based on a higher debt to income ratio, but those are the exceptions rather than the rule.

A Single Income Still has to Meet the Guidelines

All this information about debt to income ratios is useful because when a two-income couple wants to try qualifying for a mortgage using only one income, that income must still adhere to the lending guidelines. That means the single income must be used in the debt to income equation, and the result must come in at or below 43%. For some couples, this is no problem, but for others who are carrying a higher monthly debt load, this can be a challenge.

Do Your Homework Ahead of Time

Whether you decide to use one or both incomes to qualify for your new home mortgage is up to you. But doing a little work ahead of time may save you the embarrassment of being turned down by the lender. Take time to add up your monthly obligations and do the math. Knowing your debt to income percentage ahead of time will help you determine whether using only one income to qualify is an option for you.

Call Homestead Financial Mortgage with Questions

If you still have questions about whether you can qualify for a mortgage using only one income, give Homestead Financial Mortgage a call. Our experienced loan officers are happy to talk with you about your situation and help you decide on the best route to homeownership. We have four branch locations to serve you: Overland Park, KS; St. Louis, MO; Glen Carbon, IL; and Godfrey, IL. Stop in and visit or give us a call today. 

If you’ve experienced foreclosure you might think you’ll never be in a position to buy another home again. Foreclosure certainly impacts your credit score but it’s only a matter of time before you can once again apply for a mortgage. The question many people have is how long they have to wait before buying a home after foreclosure. How long depends on the circumstances of your foreclosure, your ability to increase your credit score, the type of loan you’re prepared to apply for and the foreclosure waiting period. Continue reading “Buying a Home After Foreclosure”

You hear it all over the radio and see it all over the internet. “Refinance with No Cost”, which sounds a little…errr, maybe a lot too good to be true. Today we will talk about what is a no cost mortgage refinance, how does it work, and if it is right for you. Continue reading “What Does a No Cost Mortgage Refinance Mean?”

In “Getting Ready for Home Appraisal – Part I” we explored the importance of having the right mindset and having your paperwork in order when it comes to preparing for your home’s appraisal. This week we’ll examine other important ways you can get ready for your home’s appraisal.

A big part of preparing for a home appraisal is having your home in order and the time to have any corrections and repairs made to your home is beforehand. Even if you intend to have repairs made but haven’t had time to complete them, having proof of an estimate or scheduled repair to show the appraiser can work to your advantage. Though you and your family may have lived for months with a leaky faucet, damaged window screens, dead smoke detectors or in rooms with poor paint jobs, leaving these maintenance jobs undone can dent the appraisal value of your home. And don’t underestimate the power of curb appeal. A tidy lawn and clean landscape may be the first impression an appraiser has of your home. Continue reading “Getting Ready for Home Appraisal – Part Two”

When the time comes to get ready for a home appraisal it’s important to keep in mind there are factors you can and cannot control. While you can’t control the location of your neighborhood and the value of other homes on your block, you can control what the appraiser sees when he walks up to the front door. Like many things in life, good preparation, careful attention to detail and a dose of fortunate circumstances all play a role in successful home appraisals and there’s a lot you as a homeowner can do to give yourself the best chance for a favorable appraisal. Here are some tips. Continue reading “Getting Ready for a Home Appraisal – Part One”