Tag: home buying tips

Understanding your housing expenses

When a lender reviews your loan application, their main job is to verify that you are a low-risk candidate who will be able to cover your monthly housing expenses for the full life of the loan. To do this, they will first calculate your monthly PITI:

• Principal of the loan
• Interest on the loan
• Taxes (estimated from annual payment)
• Insurance (estimated from annual payment)

While every lender is different, and every loan application is reviewed independently, the general rule of thumb is that your monthly PITI should be between 28-35 percent of your monthly income before taxes. This number is known as your front-end debt-to-income ratio.

 

Understanding your debt obligations

Of course, you may have other long-term loans or debt obligations that you pay each month. Lenders will also take these debts into consideration as they review your loan application.

The easiest way to think of a debt obligation is to consider who you are paying back. Common debt obligations include:

• Student loans
• Car payments
• Child support payments
• Credit card minimum payments (if you have a long-term balance you are paying off)
• Medical or hospital bills

To calculate your back-end debt-to-income ratio, the lender will add up your monthly debt obligations, including your hypothetical monthly PITI. They will divide that by your total monthly income before taxes.

Typically, lenders are looking for a back-end debt-to-income ratio of 35-45 percent. But again, every lender varies and your personal financial history and income history will also be factored in.

 

What about other expenses?

You have daily, weekly and monthly expenses that won’t necessarily be taken into account by a lender — but that doesn’t mean you shouldn’t think about them as you begin the path to home ownership.

Before you apply for a mortgage, take stock of your monthly expenses, including:

• Groceries
• Gas or transportation costs
• Restaurants, coffee shops and gas station pit-stops
• Mobile phone plans, cable television plans and streaming services
• Shopping and gifts

It’s likely that you could tighten up one or two of your spending categories without too much effort. Your lender may not notice, but you’ll find it easier to afford your monthly PITI and debt obligations when you minimize your other expenses.

 

How can I calculate my buying power?

If you’re looking for an easy-to-use tool that takes into account your front-end and back-end debt-to-income ratios, check out these great calculators from Prosperity Home Mortgage, LLC.

 

Understanding your housing expenses

When a lender reviews your loan application, their main job is to verify that you are a low-risk candidate who will be able to cover your monthly housing expenses for the full life of the loan. To do this, they will first calculate your monthly PITI:

• Principal of the loan
• Interest on the loan
• Taxes (estimated from annual payment)
• Insurance (estimated from annual payment)

While every lender is different, and every loan application is reviewed independently, the general rule of thumb is that your monthly PITI should be between 28-35 percent of your monthly income before taxes. This number is known as your front-end debt-to-income ratio.

 

Understanding your debt obligations

Of course, you may have other long-term loans or debt obligations that you pay each month. Lenders will also take these debts into consideration as they review your loan application.

The easiest way to think of a debt obligation is to consider who you are paying back. Common debt obligations include:

• Student loans
• Car payments
• Child support payments
• Credit card minimum payments (if you have a long-term balance you are paying off)
• Medical or hospital bills

To calculate your back-end debt-to-income ratio, the lender will add up your monthly debt obligations, including your hypothetical monthly PITI. They will divide that by your total monthly income before taxes.

Typically, lenders are looking for a back-end debt-to-income ratio of 35-45 percent. But again, every lender varies and your personal financial history and income history will also be factored in.

 

What about other expenses?

You have daily, weekly and monthly expenses that won’t necessarily be taken into account by a lender — but that doesn’t mean you shouldn’t think about them as you begin the path to home ownership.

Before you apply for a mortgage, take stock of your monthly expenses, including:

• Groceries
• Gas or transportation costs
• Restaurants, coffee shops and gas station pit-stops
• Mobile phone plans, cable television plans and streaming services
• Shopping and gifts

It’s likely that you could tighten up one or two of your spending categories without too much effort. Your lender may not notice, but you’ll find it easier to afford your monthly PITI and debt obligations when you minimize your other expenses.

 

How can I calculate my buying power?

If you’re looking for an easy-to-use tool that takes into account your front-end and back-end debt-to-income ratios, check out these great calculators from Home Services Lending.

The vast majority of Central Kentucky homebuyers will want to have a thorough home inspection performed as soon as their offer is accepted by the seller. Here are five tips on how to ensure that when selling, you pass your home inspection with the fewest issues possible.

 

1. Unfettered Access

First tip to pass your home inspection, provide unfettered access to your electric panels, heating and cooling systems and your attic. The inspector will need to assess all of these areas, so it’s best to let them get in easily. Remember also to clean the space below your sinks so the inspector can easily assess your pipes.

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2. Appliance Check

Second, be sure to empty all your appliances to facilitate the inspection (except your refrigerator, of course).  That means your washer, dryer, dishwasher and stove should all be fully empty and ready to test.

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3. Documentation

Next – if possible — provide full documentation of your appliances, systems and any work you’ve had done on them. For example, “if you’ve had an engineer inspect a crack in your foundation and there’s nothing wrong with your structure, display that report so the home inspector doesn’t have to be concerned about the crack,” says a local inspection company.

You can even attempt to provide the manuals for appliances by using online resources like GE’s Appliance Manual online center: http://www.geappliances.com/ge/service-and-support/literature.htm

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4. Light The Way

One incredibly simple tip – replace ALL light bulbs so the inspector won’t have to worry about whether a burnt out bulb is really an issue with your wiring. 

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5. Get Outta There

Last, get out of there!  Think of the inspection as another home showing – you need to be out of sight and out of mind so the inspector can speak freely with the buyers and their agent. And if at all possible, take your pets with you or arrange for them to be visiting a friend or relative during the inspection time.

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These tips are a great starting point to helping pass your home inspection. Remember, your real estate agent is your best resource throughout the entire listing process. They are there to guide you through each part of the transaction and answer any questions that you have. Rector Hayden REALTORS® are trained to handle the different situations that occur in our market and are dedicated to the success of your sale.

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Maybe you’d also find this article helpful? How Sellers Can Pass Their Appraisal