There are many benefits to owning a home, some are intangible and some are tangible. While The pride of ownership and the joy of making a place yours, and call it home is difficult to measure, it is one of the most sought out goals that individuals and families set out to accomplish in their life time. For this reason buying a home is a mayor decision and an exciting experience.
There are other main reasons:
Investment: for most owners their residence is their largest asset. As you live and make improvements to your home and gradually pay down the principal on your mortgage, your are building on this equity.
Income tax savings: in most cases, all of the interest you pay on your mortgage payments and your property taxes are deductible for income tax purposes.
Fix monthly housing payment: if you chose to go with a fixed-rate mortgage, the monthly rate of your mortgage won’t change for the length of the term.
Many lenders use the 28/36 rule as a benchmark for calculating the amount of debt that can be taken on by an individual or household.
The 28 ratio (front-end-ratio) refers to the percentage of your gross monthly household income that should be alocated for housing cost each month, including principal, interest, taxes and insurance. The 36 represents the total debt that you carry. It should not exceed 36% off your total income.
If you annual salary is $75,000. Divide 75,000 by 12, this will give you a monthly gross income of $6,250. Multiply that by .28, and you’ll find that you should spend no more than $1,750 each month on total housing cost.
The 36 ratio (back-end-ratio) of the 28/36 rule refers to your overall debt, which shouldn’t exceed 36% of your income. This ratio includes a look at all of your debt payments (including mortgage payment). For example, to calculate your 36 ratio you multiply your monthly gross income $6250 by .36 and it will give you the total debt-to-income-ratio. This is important to consider because other high monthly debt obligations such as car and credit card payments impact the amount you can afford to spend on housing.
Can you still get a mortgage if you don’t fit this profile? Yes, you can. However, if your lender uses this ratio, you might not get the best possible mortgage terms if you don’t meet these requirements.
Seek professional assistance: A real estate transaction is a complex process. A good agent is familiar with all the details pertaining to a real estate transaction.
It is important that the agent knows the area very well. It is important that they are up-to-date with today’s constant changes in the real estate market. In other words, focus on getting somebody that can get the job done. Even if your brother’s friend has a real estate license, find out if this person is the most qualified to help you buy your home. Personal referrals are great , but only if they’re based on relevant criteria.
Consult with a mortgage broker, bank, or financial adviser and get pre-approve: Learning about financing options on what you can afford before you start looking for a home will save you time and streamline the buying process. Once you have determined your budget, you should obtain a pre-approval letter from a bank or mortgage broker. Your agent will need this letter to submit with any purchase offers to demonstrate your credibility as a buyer.
Buying a home is one of life’s most exciting experiences. That being said, finding the perfect home to fit your needs can take a great deal of time and effort. There are numerous things to consider, type of property, floor plan, neighborhood, amenities, price, as well as the same amount of careful thought and effort should be put into the purchase transaction. A highly qualified Real Estate Agent will inform you and help you analyze the ever changing real estate market.
At BrightStar we will help you navigate through your search and transaction making the purchasing of your home a rewarding and stress-free experience.