Whether you are new to the buying process or have some experience, you need the proper tools and guidance to make an informed decision. As licensed Real Estate Professionals, our Associates have all the resources necessary to aid you in your home search and advise you through every step of the purchase process.
Benefits of Home Ownership
Homeownership has many advantages - both financial and personal. They include, but are not limited to:
- Tax savings.
You may earn significant tax savings from your mortgage interest if you itemize your deductions.
- A more stable monthly housing expense.
Depending on the type of loan you choose, your monthly housing payment can remain the same for the life of your mortgage.
Home ownership allows you to build equity in your home over the life of your loan, which can mean a potential source of cash or savings down the road.
To get a quick idea of what you can afford to spend, multiply your annual gross income (before taxes) by 2.5. For example, if your annual household income is $50,000, you might be able to qualify for a $125,000 home. This is just a rough estimate - the actual number will vary based on factors such as your debt and credit history.
Mortgage lenders typically use the housing expense and debt-to-income ratios to more accurately determine how much you can afford to spend on your mortgage.
- Housing Expense Ratio
Mortgage lenders recommend that your monthly mortgage payment not be more than a quarter to a third of your monthly gross income. This percentage can change based on the type of mortgage you choose and sometimes the location of the home.
- Debt-to-Income Ratio
You need to factor other debts when determining affordability of monthly mortgage payments. Mortgage lenders look at whether total debt exceeds 30-40% of your monthly gross income. Remember, debt is not just credit cards and student loans. It can also include alimony, child support, car loans, and housing expenses.
A mortgage lender can help you to better understand these guidelines and what you can afford.
Lenders evaluate mortgage applications a lot differently today than they did even 10 years ago. And even more has changed in the last 20 years. What used to close the door to homeownership may not be a factor today.
Here are some common homeownership myths:
Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home with less-than-perfect credit. And remember, you can improve your credit over time.
Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low and no down payments. But remember to factor in other costs such as closing costs, property taxes, moving expenses, and repairs.
Myth: You can't buy a home in the U.S. if you're not a citizen.
Fact: If you're a legal resident, you can purchase a home in the U.S.
Myth: If you don't have a bank account or credit cards, you can't qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you to establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. You'll likely need to keep records showing a history of payments you've made for items such as rent, utilities, and car note.
Myth: Lenders share your personal financial information with other companies.
Fact: By law, banks and other financial institutions are restricted in their uses and disclosures of information about you. In some situations, you may opt to restrict the disclosure of the information you don't want to share.
Myth: If you're late on your monthly mortgage payments, you'll lose your house.
Fact: If you have a financial hardship, like the death of your spouse or a medical emergency and fall behind, it's possible to keep your home and get back on track if you contact your lender early.
Myth: You can't get a mortgage if you've changed jobs several times in the last few years.
Fact: Not true. You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you've had a stable income.