Are you ready to buy?
I’ve heard so much buzz about it being a buyer’s market. It’s true! Home prices and interest rates are at an all-time low. Although it’s tempting to run out and make an offer on a home, make sure that you do your research about how much home you can actually afford. Part of the reason for the “mortgage meltdown” was because the people that were buying weren’t in the best position to buy. As a result, banks have become very strict on who they will lend to. In addition to the down-payment and your credit score, you should also check your debt-to-income ratio. I’ll let you know how to calcuate that figure in a second!
Let’s start with an example! Let’s say Mr. or Mrs. XYZ makes $120,000 per year. After dividing it by 12, he/she grosses $10,000 per month. Most banks will allow a monthly mortgage payment of 28% of your gross monthly income: $2,800 in this case. However, don’t forget about your other debt! Let’s say they have monthly credit card payments and a car note that totals $800. With a mortage plus the other debt they are at a total of $3,600 or 36% of their monthly income. In factoring in all of one’s debt, banks are looking for a debt-to-income ratio of no more than 36%.
While I am not a financial advisor, I encourage you (whether looking to purchase or not) to do some cacluations to see where you stand. Information and knowledge is power and you may not be that far off! There’s more to come about financing, purchasing, and leasing properties!
I welcome all comments and questions! Feel free to chime in!
COMING SOON: Coming Soon: The David King Team presents a FREE e-book: The Buyer’s Guide Template!