| 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.
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:
|
Why
buy a house? |
| 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:
|
A real estate agent is 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 regularly publishes quarterly
reports on home building and home buying.
Your local builders association probably
gets this report. If not, the housing
research firm is located in Canton, Mich.;
call (800) 755-6269 for information; the
firm also maintains an Internet site.
Finally, check with the U.S. Bureau of
the Census in Washington, D.C.; (301)
495-4700. The census bureau also maintains
a site on the Internet. The Chicago Title
company also has published a pamphlet,
"Who's Buying Homes in America."
Write Chicago Title and Trust Family of
Title Insurers, 171 North Clark St., Chicago,
IL 60601-3294. |
|
| 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 an 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.
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