New Home Mortgage - How to Determine What You Can Actually Afford
September 26, 2005 by
Filed under Finance
Julian Lim asked:
Here are some ways to help you determine the guidelines for the size of your new home mortgage loan. If you plan and acquire the right size home loan, you are less likely to run into financial difficulty.
It is unfortunate that many people applying for a new home mortgage see the loan only in terms of whether the payment on the home is less than the amount of disposable income for housing earmarked in the family budget. In truth, there are many other significant factors that should be considered before determining if owning a new home is the right answer. Further, the size and location of the home are factors that impact the price. Considering such factors will help you make the proper decision about the amount of house that is appropriate for your family situation.
Income
The income level in your household used to be the determining factor of the amount of money you could borrow on a new home mortgage. Because the interest rate was fixed at a certain percentage, the lender had to be certain that the income was sufficient and likely to remain so during the life of the loan. Some assumptions about the income included that it was likely to increase over time, especially in a young borrower. The amount of the loan was often tied to the annual income, such as the price of the house could not be more than 2.5 times the household annual income. Today, this factor is given less importance than the amount and kind of credit history or credit score that you have attained.
Debt
Determining the amount of house you can afford for your new home mortgage should take into consideration two different kinds of debt. The first is that debt you already owe. If you have numerous credit cards some or most of them with available balances, you can more than likely be approved for a home loan that is larger than what you can honestly afford. Since your FICO score is based on credit rather than on income, this can be a very seductive danger. You will end up with a home with large payments and too many credit cards. The second type of debt is that added when you achieve the mortgage. Depending upon the type of mortgage, you may be totally at the mercy of rapidly increasing mortgage payments that are not covered by your income.
Stability
The stability needed to obtain the best size of house for you is related both to your stability as evidenced by employment history, credit history and other more intangible factors. In addition, when looking at a new home mortgage, you will want to consider the stability of the community in which you live. Is it a one-employer city or is the economy strong and vibrant?
Housing Market
Determining how much house you can afford on a new home mortgage depends on the general housing market in your community or neighborhood. If the housing market is strong and vibrant in the area, you can probably allow for a somewhat larger mortgage on a new home than otherwise. This statement assumes that you plan to live in the area for a period of at least 3 years.
Here are some ways to help you determine the guidelines for the size of your new home mortgage loan. If you plan and acquire the right size home loan, you are less likely to run into financial difficulty.
It is unfortunate that many people applying for a new home mortgage see the loan only in terms of whether the payment on the home is less than the amount of disposable income for housing earmarked in the family budget. In truth, there are many other significant factors that should be considered before determining if owning a new home is the right answer. Further, the size and location of the home are factors that impact the price. Considering such factors will help you make the proper decision about the amount of house that is appropriate for your family situation.
Income
The income level in your household used to be the determining factor of the amount of money you could borrow on a new home mortgage. Because the interest rate was fixed at a certain percentage, the lender had to be certain that the income was sufficient and likely to remain so during the life of the loan. Some assumptions about the income included that it was likely to increase over time, especially in a young borrower. The amount of the loan was often tied to the annual income, such as the price of the house could not be more than 2.5 times the household annual income. Today, this factor is given less importance than the amount and kind of credit history or credit score that you have attained.
Debt
Determining the amount of house you can afford for your new home mortgage should take into consideration two different kinds of debt. The first is that debt you already owe. If you have numerous credit cards some or most of them with available balances, you can more than likely be approved for a home loan that is larger than what you can honestly afford. Since your FICO score is based on credit rather than on income, this can be a very seductive danger. You will end up with a home with large payments and too many credit cards. The second type of debt is that added when you achieve the mortgage. Depending upon the type of mortgage, you may be totally at the mercy of rapidly increasing mortgage payments that are not covered by your income.
Stability
The stability needed to obtain the best size of house for you is related both to your stability as evidenced by employment history, credit history and other more intangible factors. In addition, when looking at a new home mortgage, you will want to consider the stability of the community in which you live. Is it a one-employer city or is the economy strong and vibrant?
Housing Market
Determining how much house you can afford on a new home mortgage depends on the general housing market in your community or neighborhood. If the housing market is strong and vibrant in the area, you can probably allow for a somewhat larger mortgage on a new home than otherwise. This statement assumes that you plan to live in the area for a period of at least 3 years.
Less First Time Buyers Equals More New Homes for Sale
September 9, 2005 by
Filed under Real Estate
Eddy Kicker asked:
One of the best things about buying a new home is the untouched - pristine- cleanliness that you are also buying. If you have always dreamed of owning a brand new home, this is the time to find a bargain. At the moment you can choose from a wonderful selection of homes with luxurious touches.
It is generally accepted that most people buying a brand new home are stepping up the realty ladder and are not first time buyers. They have usually done their groundwork with the smaller, older home and are gleefully anticipating a sparkling new home.
However, before buying a new home, the existing home must be sold and this will often be to a first time buyer. There has been a shortage of first time buyers which means less home owners have been able to make the transition up to a brand new home. This explains the problem of why less new homes are being sold in the property market today.
To a lesser extent, this lack of first time buyers is a side-effect of the realty crisis. It takes nerve to step into the realty market and take on a huge debt when you could just carry on renting. Reading of so many foreclosures has kicked the self-confidence out from under a number of younger buyers. They have ‘cold feet’ and are opting to stay renting, or stay in mum and dad’s basement suite.
These figures have been confirmed after some hard mathematical calculations by the National Association of Realtors (NAR). Adding together the national birth rate, and the number of illegal and legal immigrants, the numbers would predict that approximately 1.2 to 1.5 million households will normally start up annually.
These newly-formed households are comprised of renters who have finally saved a down payment, or adult children who have been living in the parents’ basement and are finally ready to move out. Each year a certain proportion of them are ready to invest in a home of their own.
Actual figures show that in 2007, only half of the expected number of new households were started up. To some extent this has caused the property markets to come to a standstill.
In many areas of the USA, builders have a stockpile of brand new homes. Predictions are suggesting that the equivalent of a nine month supply of homes is stockpiled across the nation. In South Carolina, there are over 800 new houses waiting to be bought from several different contractors.
The good news is that according to the Mortgage Bankers Association’s (MBA) weekly survey, first time buyers may be returning to the fray. There are many good reasons why now is a good time to buy your first home, and first time buyers are aware of this and are timidly stepping back into the market. Hopefully they will be encouraged by the large selection they will have.
The MBA announced that the volume of mortgage application requests has just gone up by three percent over the previous week. Copious amounts of media coverage have educated the public into what went wrong. Repeated decreases in the mortgage interest rates have increased public understanding of mortgages. Purchase applications also rose by twelve percent.
The NAR says that as homes are continuing to be built at the same rate, the glut of new homes will grow even larger. All these facts may point to a buyers’ market in the new housing section of realty.
With this in mind, it is possible that deals can be found on the new homes market. Perhaps some optional extras can now be tacked onto the asking price; maybe landscaping or a luxury deck?
One of the best things about buying a new home is the untouched - pristine- cleanliness that you are also buying. If you have always dreamed of owning a brand new home, this is the time to find a bargain. At the moment you can choose from a wonderful selection of homes with luxurious touches.
It is generally accepted that most people buying a brand new home are stepping up the realty ladder and are not first time buyers. They have usually done their groundwork with the smaller, older home and are gleefully anticipating a sparkling new home.
However, before buying a new home, the existing home must be sold and this will often be to a first time buyer. There has been a shortage of first time buyers which means less home owners have been able to make the transition up to a brand new home. This explains the problem of why less new homes are being sold in the property market today.
To a lesser extent, this lack of first time buyers is a side-effect of the realty crisis. It takes nerve to step into the realty market and take on a huge debt when you could just carry on renting. Reading of so many foreclosures has kicked the self-confidence out from under a number of younger buyers. They have ‘cold feet’ and are opting to stay renting, or stay in mum and dad’s basement suite.
These figures have been confirmed after some hard mathematical calculations by the National Association of Realtors (NAR). Adding together the national birth rate, and the number of illegal and legal immigrants, the numbers would predict that approximately 1.2 to 1.5 million households will normally start up annually.
These newly-formed households are comprised of renters who have finally saved a down payment, or adult children who have been living in the parents’ basement and are finally ready to move out. Each year a certain proportion of them are ready to invest in a home of their own.
Actual figures show that in 2007, only half of the expected number of new households were started up. To some extent this has caused the property markets to come to a standstill.
In many areas of the USA, builders have a stockpile of brand new homes. Predictions are suggesting that the equivalent of a nine month supply of homes is stockpiled across the nation. In South Carolina, there are over 800 new houses waiting to be bought from several different contractors.
The good news is that according to the Mortgage Bankers Association’s (MBA) weekly survey, first time buyers may be returning to the fray. There are many good reasons why now is a good time to buy your first home, and first time buyers are aware of this and are timidly stepping back into the market. Hopefully they will be encouraged by the large selection they will have.
The MBA announced that the volume of mortgage application requests has just gone up by three percent over the previous week. Copious amounts of media coverage have educated the public into what went wrong. Repeated decreases in the mortgage interest rates have increased public understanding of mortgages. Purchase applications also rose by twelve percent.
The NAR says that as homes are continuing to be built at the same rate, the glut of new homes will grow even larger. All these facts may point to a buyers’ market in the new housing section of realty.
With this in mind, it is possible that deals can be found on the new homes market. Perhaps some optional extras can now be tacked onto the asking price; maybe landscaping or a luxury deck?