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Q: |
How do you
find out the value of a troubled property?
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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.
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Q: |
Why buy a
house? |
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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.
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Q: |
What can I
afford? |
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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. |
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Q: |
How much will
I spend on maintenance expenses? |
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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.
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Q: |
Where do I get
information on housing market stats? |
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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 Clark St., Chicago, IL
60601-3294. |
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Q: |
What is the
standard debt-to-income ratio? |
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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. |
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Q: |
How long do
bankruptcies and foreclosures stay on a credit report?
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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.
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Q: |
What is Fannie
Mae's low-down program? |
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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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