How much can you afford?
Understanding how much you can afford is one of the most important rules of home buying. Depending on your individual situation, your budget can affect everything from the neighborhoods where you look, to the size of the house, and even what type of financing you choose. Lenders will look at more than just your income to determine the size of the loan. You may also find that there are creative financing options that can help boost your purchasing power. Loan pre-qualification vs. pre-approvalOne of the best ways to determine your budget is to have your real estate agent or lender pre-qualify you for a loan. Prequalification is different from pre-approval. Prequalification is only an estimate of what youll be able to afford. Pre-approval is a more formal process where a lender examines your finances and agrees in advance to loan you money up to a specified amount. What factors are important to lenders?Banks and lending institutions will use several criteria to determine how much money theyll agree to lend. These include, your gross monthly income, your credit history, the amount of your outstanding debts, your savings (the amount of money available for a down payment and closing costs), your choice of mortgage (30-year, FHA, etc.), and/or current interest rates. Lenders also use your financial information to figure out two very important ratios: The debt-to-income ratio – Many lenders use a rule of thumb that the amount of debt you are paying on each month (car payment, student loan, credit card, etc,) shouldnt exceed more than 36 percent of your gross monthly income. FHA loans are slightly more lenient.The housing expense ratio It is generally difficult to obtain a loan if the mortgage payment will be more than 28 to 33 percent of your gross monthly income. Down payments make a differenceIf you can make a large down payment, lenders may be more lenient with their qualifying ratios. For example, a person with a 20 percent down payment may be qualified with the 33 percent housing expense ratio, while someone with a 5 percent down payment is held to the stricter 28 percent ratio. Loan ProgramsMany local governments have special loan programs designed to help first-time homebuyers. Loans may be available at reduced interest rates, or with little or no down payments. Check with your local housing authority for more information.Our Future Summit will host a panel discussion to address these concerns to consider what constitutes affordable or attainable housing on Thursday, July 10th from 7 to 9 pm at the Community & Senior Center near Frisco. With more than two-thirds of local housing units held by absentee owners and high-end residential development displacing the supply of reasonably-priced rental units, Summit Countys full-time working residents face an uncertain future. Many of our teachers, first responders, health professionals, service employees and resort/hospitality industry workers are moving to bedroom communities in neighboring Lake, Grand, Park and Clear Creek Counties. They face increasing commuting costs as gas prices respond to growing worldwide demand and the declining value of the dollar. Developing attainable housing in Summit County is an ever-growing challenge says Jennifer Kermode, executive director of the Summit Combined Housing Authority and panel moderator. Weve got to have cooperative efforts from all the players, and a strong commitment to keep a middle-class community here. Then we can find solutions to help solve our dilemma. Bringing the public into the discussion is key to our efforts, she adds. Joining Kermode on the panel will be:City of Aspen mayor Mick Ireland Wellington neighborhood developer David ONeil Summit County planner John Roberts Our Future Summit is a quality of life institution dedicated to a better Summit County by providing opportunities each month for informed discussion on topics of interest to the community.Welcome Home is compiled using various industry sources by TheTeam@Elich.com. Butch Elich has been helping people with their real estate needs in Summit County for over 20 years. His team includes Associate Broker, Paula Parker, a Summit resident for 23 years. Find them on the web at http://www.elich.com, or at RE/MAX Properties of the Summit, 305 Main St., Frisco.
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