Experienced homebuyers know that one of the 1st steps towards a successful house hunt is taking a hard, objective look at finances. Determining the amount of money you can spend on the purchase of your new home affects almost every part of the buying process, including how you write the offer, which mortgage programs you will qualify for, shopping for the best mortgage loan, and which homes are within your price range.   

              Below are questions all homebuyers should ask themselves:

·    How much money do I have at my disposal for a down payment? The cash you have in your account* for a down payment will affect your qualifying for various types of loans. *The money will need to be verified by the lender, it cannot be in a safe-deposit box or under your pillow. 

·     Do I have the funds to give a check to the sellers for the earnest money? Earnest money (or “good faith deposit”) is a check presented to the sellers of a home in order to strengthen and support your offer to purchase their property. If you, as the buyer, decide to rescind your offer after the contingency period in the contract, the sellers will usually retain this deposit as damages. 

·    How much additional cash will be available to pay for my closing costs? There are typical costs associated with closing the sale of a house. These fees can be split between the buyer and the seller, if it is so agreed upon in the sales contract.  

·     What is the highest mortgage amount that I can comfortably pay every month? Many lenders use the 28/36 ratio to figure the maximum monthly mortgage payment, on Conventional Loans, you are able to afford.  Keep in mind; there are many other types of Conventional and Government Loans that have different or higher guidelines, although you will find they normally have trade offs.

The 28/36 Rule
28% of your gross monthly income is the most that can be applied to your mortgage, property taxes and hazard insurance. 36% of your gross monthly income is the most that can be applied to your mortgage expenses, including all your regular debt payments (car loans, credit cards, other loans, etc.).

By:
Tom Marti  (Real Estate Broker)

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