| Q:
|
How
do you find out the value of a troubled
property? |
| A:
|
Buyers considering a foreclosure property
should obtain as much information as possible
from the lender about the range of bids
being sought, including the range of bids
expected. It also is important to examine
the property. If you are unable to get into
a foreclosure property, check with surrounding
neighbors about the property's condition.
It also
is possible to do your own cost comparison
through researching comparable properties
recorded at local county recorder's and
assessor's offices, or through Internet
sites specializing in property records.
|
|
| Q:
|
When
is the best time to buy? |
| A:
|
Here are some frequently cited reasons for
buying a house:
*
You need a tax break. The mortgage interest
deduction can make home ownership very
appealing.
* You are not counting on price appreciation
in the short term.
* You can afford the monthly payments.
* You plan to stay in the house long enough
for the appreciation to cover your transaction
costs. The costs of buying and selling
a home include real estate commissions,
lender fees and closing costs that can
amount to more than 10 percent of the
sales price.
* You prefer to be an owner rather than
a renter.
* You can handle the maintenance expenses
and headaches.
* You are not greatly concerned by dips
in home values. |
|
| Q:
|
What
can I afford? |
| A:
|
Know what you can afford is the first
rule of home buying, and that depends on
how much income and how much debt you have.
In general, lenders don't want borrowers
to spend more than 28 percent of their gross
income per month on a mortgage payment or
more than 36 percent on debts.
It pays
to check with several lenders before you
start searching for a home. Most will
be happy to roughly calculate what you
can afford and prequalify you for a loan.
The price
you can afford to pay for a home will
depend on six factors:
1. gross income
2. the amount of cash you have available
for the down payment, closing costs and
cash reserves required by the lender
3. your outstanding debts
4. your credit history
5. the type of mortgage you select
6. current interest rates
Another
number lenders use to evaluate how much
you can afford is the housing expense-to-income
ratio. It is determined by calculating
your projected monthly housing expense,
which consists of the principal and interest
payment on your new home loan, property
taxes and hazard insurance (or PITI as
it is known). If you have to pay monthly
homeowners association dues and/or private
mortgage insurance, this also will be
added to your PITI.
This ratio
should fall between 28 to 33 percent,
although some lenders will go higher under
certain circumstances. Your total debt-to-income
ratio should be in the 34 to 38 percent
range. |
|
| Q:
|
How
much will I spend on maintenance expenses?
|
| A:
|
Experts generally agree that you can
plan on annually spend 1 percent of the
purchase price of your house on repairing
gutters, caulking windows, sealing your
driveway and the myriad other maintenance
chores that come with the privilege of homeownership.
Newer homes will cost less to maintain than
older homes. It also depends on how well
the house has been maintained over the years.
|
|
| Q:
|
Where
do I get information on housing market stats?
|
| A:
|
HomeJoy Real Estate agents are a good source
for finding out the status of the local
housing market. So is your statewide association
of Realtors, most of which are continuously
compiling such statistics from local real
estate boards.
For
overall housing statistics, U.S. Housing
Markets, www.meyersgroup.,com, regularly
publishes quarterly reports on home building
and home buying. Your local builders association
probably gets this report. Finally, check
with the U.S. Bureau of the Census in
Washington, D.C.; (301) 763-3199, www.census.gov.
The Chicago Title Company also has published
a pamphlet, "Who's Buying Homes in
America." Write Chicago Title, 601
Riverside Ave., Jacksonville, FL 32204;
(888) 934-3354, www.ctic.com. |
|
| Q:
|
What
is the standard debt-to-income ratio? |
| A:
|
A standard ratio used by lenders limits
the mortgage payment to 28 percent of the
borrower's gross income and the mortgage
payment, combined with all other debts,
to 36 percent of the total.
The fact
that some loan applicants are accustomed
to spending 40 percent of their monthly
income on rent -- and still promptly make
the payment each time -- has prompted
some lenders to broaden their acceptable
mortgage payment amount when considered
as a percentage of the applicant's income.
Other
real estate experts tell borrowers facing
rejection to compensate for negative factors
by saving up a larger down payment. Mortgage
loans requiring little or no outside documentation
often can be obtained with down payments
of 25 percent or more of the purchase
price. |
|
| Q:
|
How
long do bankruptcies and foreclosures stay
on a credit report? |
| A:
|
Bankruptcies and foreclosures can remain
on a credit report for seven to 10 years.
Some lenders
will consider a borrower earlier if they
have reestablished good credit. The circumstances
surrounding the bankruptcy can also influence
a lender's decision. For example, if you
went through a bankruptcy because your
employer had financial difficulties, a
lender may be more sympathetic. If, however,
you went through bankruptcy because you
overextended personal credit lines and
lived beyond your means, the lender probably
will be less inclined to be flexible.
|
|
| Q:
|
What
is Fannie Mae's low-down program? |
| A:
|
Fannie Mae is expanding the availability
of low-down-payment loans in an effort to
help more people nationwide qualify for
a mortgage.
Two new
programs will help potential buyers overcome
two of the most common obstacles to home
ownership, low savings and a modest income.
To address
many first-time buyers' struggles to save
the down payment, Fannie Mae developed
Fannie 97. The program provides 97 percent
financing on a fixed-rate mortgage with
either a 25- or 30-year loan term through
Fannie Mae's Community Home Buyers Program.
Fannie
Mae's new Start-Up Mortgage will assist
buyers with a 5 percent down payment who
are at any income level. Yet applicants
do not need as much income to qualify
and less cash for closing than with traditional
mortgages. Borrowers will receive a 30-year,
fixed-rate mortgage with a first-year
monthly payment that is lower than the
standard fixed-rate loan.
Freddie
Mac, Fannie Mae's counterpart, also offers
low-down-payment loan programs. |
|
