It's Time!

Like impatient children in the back seat of the car, for the past year or two, many home buyers have been asking themselves, "Are we there yet? Are we there yet?" Well, we're there! There has not been a better time to buy since before the millennium was new. By better, of course, we mean that prices are lower than they have been in nearly 10 years. Many older Americans have been through a total of 3 real estate booms in their lives. This last one saw a greater than 80% jump in existing home online spiele kostenlos sales since the late 90's. When credit was flowing free and rules were bent to the point of breaking, nearly everyone could qualify to be a home buyer. It is safe to say that times have certainly changed. In the last boom, home buyers had stars in their eyes, and home sellers cashed in. House hunting became sport and the hunted could taunt the hunters mercilessly. The creative credit terms that helped create this last boom have left many family's finances in ruins. Those who didn't jump onto the bubble themselves are nevertheless suffering the slings and arrows of questionable practices and bad decisions. It's a lot harder to get a mortgage than it used to be, even if you are a good risk. So, the question is really, “Can I be a home buyer?”

These days, the banks are not as willing as they used to be to lend money. While the rates are still attractive, the restrictions on who can borrow are more like they were before the boom. Banks want to see an actual cash down payment, good credit scores, livable properties and clean paperwork. Let’s say you've been smart. You've saved your money and managed your credit well. You've been carefully watching the real estate market and have decided that it is probably time to make a move. Before you hit the open house trail and start dreaming big about new digs, know how much home can you afford. The math really isn’t that hard.

Besides your credit score which should be in the high 600’s or over, one of the most important number home buyers need to know is their debt-to-income ratio. Mortgage lenders like to see no more than 36%. Here’s how to get to that number. Take your monthly income, before taxes and other deductions, and multiply it by 36%. This is the total amount of your income that can be dedicated to paying debt. So if you and your spouse together make $8,000 a month, your total debt payments including your mortgage payment can be $2,880 or $8000 X .36. Now, back out of this number total amount of all debt payments NOT related to housing. Let’s say this is $1,000. This means that the maximum mortgage payment including property taxes, insurance and private mortgage insurance, if needed, is $1,880. Divide this by your total gross monthly income and you get 23.5%, which is below another target number: 28%. Lenders like to see no more than 28% of your gross monthly income going toward housing.

Consider the maximum monthly housing payment honestly alongside all your other monthly living expenses. Just because the bank might lend it to you doesn’t mean you can necessarily afford it. Many home buyers who are already excited about a particular property will begin making all sorts of promises to themselves about how they will downsize their lifestyle to be able to afford that gorgeous “McMansion” they’re sure they can’t live without. So, keep being smart. Do all your math homework before you start shopping for either a mortgage or a home.