| cliff kramer broker associate bray and co realtors 1015 n. 7th street grand junction, co 81501 1-970-242-3647 1-800-800-926-6862 fax: 1-970-242-0436 |
 just a click away! e-mail: cliff@brayandco.com | 
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finding what price house you can afford to buy can be a time-consuming process of calling on several lenders, collecting data on various current mortgage rates and reviewing your finances with several lending officers. fortunately, there's an easy way around all this. with a few simple steps, you can figure out for yourself the approximate mortgage amount a lender is apt to approve for you. that amount, plus the amount of your down payment, gives you the price range of homes you are qualified to buy. in real estate, we call this exercise "pre-qualification." |
press here for free calculator downloadfirst, you need to find what interest rate is currently being charged for 30-year fixed rate loans. but, instead of phoning several lenders, you can simply give me a call (or, an e-mail message). i make it my business to have the latest information on lenders' rates and financing packages right at hand. next, apply the following do-it-yourself system to zero in on the approximate mortgage amount lenders are likely to approve:
1. calculate your gross monthly income - the amount you make before deductions. add your spouse's gross monthly income, if any.
2. deduct from the total any monthly payments you make on long-term debts (more than 10 months), such as an auto loan or regular payments on furniture, appliances, school, alimony or child support.
3. multiply the resulting figure by 36% (.36) to get your "income-to-debt ratio." the answer will conform with generally accepted lenders standards of what borrowers can afford, after a down payment of 10%. some lenders and mortgage plans apply more or less strict factors, say 33% or 38%, especially when your down payment is 5% or 20% respectively. also many lenders will calculate a second "piti ratio" figure (principal, interest, taxes and insurance), using 28% times gross monthly income without subtracting debts, to establish your qualified monthly payment range. again, the % factor without subtracting debts may vary, say 25% or 33%, under certain circumstances.
4. take a "guesstimate" of average annual real estate taxes in your area (in grand junction, it is approximately of 1% of the sales price), plus the annual cost of homeowner's insurance. divide by 12 to obtain a monthly figure. (on average, the monthly cost of these two items might be about of 1% of the house purchase price. ask me about your specific situation.)
5. deduct the monthly taxes and insurance cost from both figures you arrived at in step 3. the result is the ballpark monthly payment on principal and interest you can afford to pay on a mortgage. with the amount of principal and interest (pi) payment you can make, in hand, i can calculate the amount of mortgage you can obtain, at various rates. or you can find the approximate answer for yourself with the java calculator. i'd be happy to discuss the many alternative mortgage plans that can dramatically increase the home price you can afford. remember, the price range of homes you can afford is figured after a down payment is added to your qualified loan amount. in addition, you'll need to set aside an amount for closing costs and point payments. ask me how much these may amount to in your specific situation.
what is p.i.t.i.? principal, interest, taxes, insurance. these are the four elements that make up the usual monthly mortgage payment. these costs are often called "carrying charges." although lenders qualify borrowers based on p.i.t.i., smart buyers also allocate income to meet maintenance, utility costs and any homeowner's association or condominium fees in addition. today's market offers a unique opportunity to save by buying now. first of all, properties are available at moderate market prices, with selections through all price ranges, buy-up homes, executive properties and luxury estates. also, lenders are offering attractive rates and innovative financing. that means your income can begin to benefit for more home today. buyers cannot only take advantage of today's market, they can begin to benefit from the big four wealth builders of home ownership. four wealth builders leverage. leverage means using borrowed money (opm: "other people's money") to control a property and receive its benefits. here's how leverage works. say you've acquired a $100,000 house with only a 10% down payment ($10,000). suppose the property appreciates 10% in the first year and the house is worth $110,000. you've earned $10,000 on your investment of $10,000 - a profit of 100% in a year. (financing costs would, of course, lower the net yield.) that's leverage - a big return by using borrowed money. if home prices rise only 3% a year in the next decade, the home you bought this year for $100,000 would be worth $134,392 in ten years. with $10,000 down, you'd realize a 344% profit. if prices rise 5% a year, you'd profit 629%; at 8% a year, you'd profit 1,159% due to your leveraged purchase. tax breaks. you'll also realize savings from the tax advantages of home ownership. a homeowner's taxable income is reduced by tax deductions (for interest payments, points and real estate taxes where applicable). later, any gain you realize at sale gets special treatment, and you can put off paying taxes if you buy a home for at least as much as you got for the old one. when you're over 55, you get a one-time exemption that lets you sell your home and keep $125,000 in profits, tax free. savings. mortgage principal payments go into your own pocket, not someone else's. you're saving and building equity as you pay for a home that's appreciating in value. (the amount of appreciation depends on inflation, the local economy and whatever home improvements you make.) but there are fewer appreciation windfalls in today's market. you must buy wisely. not all locations will give you the top-dollar investment return you want. my up-to-the-minute market research will help you buy smart. owner pride. the fourth pillar of home-owning involves, of course, many things besides keeping a roof over your head. you acquire, along with a structure, the responsibility for maintenance and repair. most homeowners find the benefits of owning far outweigh the upkeep efforts - and many homeowners enjoy the work. you also put down roots and become more involved in the community. in short, you own an investment that builds intangible riches while you lock in your housing costs and avoid unpredictable rent hikes. |
| cliff kramer broker associate bray and co realtors 1015 n. 7th street grand junction, co 81501 1-970-242-3647 1-800-926-6862 fax: 1-970-242-0436 |
just a click away! e-mail: cliff@brayandco.com |
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