Frequently
Asked Questions
Below we have listed some of your most frequently asked questions.
If you have any additional questions or comments please contact
us. FAQ Categories:
Appraisals & Market Value |
Buying Real Estate | Condominiums & Townhomes | Escrow & Closing
Costs | First Time Buyers | Home
Inspections | Leveraging Your Money
| Making an Offer | Mortgages & Financing | New Homes & Vacation
Homes | New Home Construction | Preconstruction
Condominiums | Selling Real Estate
| What can I afford? Appraisals & Market Value
• What is the difference between
list price, sales price and appraised value?
• What is the difference between
market value and appraised value?
Buying Real Estate
• Do we dig deep and buy a dream
home or settle for a starter home?
• How do you choose between buying
and renting?
Condominiums & Townhomes
• Are condominiums risky to
buy?
• How do you choose between
condos and single-family homes?
Escrow & Closing Costs
• What are closing costs?
• Who pays the closing costs?
• Why do I need a title report?
First Time Buyers
• How do you choose between buying
and renting?
Home Inspections
• Do I need a home inspection?
• How do I find a home inspector?
• What's a home inspection?
Leveraging Your Money
• What is leveraging your money in real
estate all about?
Making an Offer
• Is a low offer a good idea?
• What are some tips on negotiation?
• What contingencies should be put
in an offer?
• What is the difference between
list price, sales price and appraised value?
Mortgages & Financing
• Are interest rates negotiable?
• How are the rates set for seller
financing?
• How do adjustable-rate loans
change?
• How do you choose between fixed
and adjustable rates?
• What are the most popular ARM
indices?
• What is the value of a mortgage
lock-in?
• Where are interest rates headed?
New Homes & Vacation Homes
• Can you negotiate the price on new
homes?
• Should I buy a vacation home?
New Home Construction
• Should I hire a home inspector for
a new home?
Pre-construction Condominiums
• What are the advantages in purchasing
your property pre-construction?
• How can I find out about pre-construction
offerings prior to public offering?
• What down payment is required to reserve
a property pre-construction?
Selling Real Estate
• How do you prepare a house to
sell?
• How does someone sell a slow mover?
• How is the price set?
• What are the standard ways of
finding out what a house is valued at?
• What are the two most important
factors when selling a home?
• What is the difference between
list and sales prices?
• Where do I get information on
housing market stats?
What can I afford?
• How long do bankruptcies and foreclosures
stay on a credit report?
• What can I afford?
Appraisals & Market
Value
What
is the difference between list price, sales price and appraised
value?
The list price is a seller's advertised price, a figure
that usually is only a rough estimate of what the seller wants
to get. Sellers can price high, low or close to what they hope
to get. To judge whether the list price is a fair one, be sure
to consult comparable sales prices in the area. The sales price
is the amount of money you as a buyer would pay for a property.
The appraisal value is a certified appraiser's estimate of the
worth of a property, and is based on comparable sales, the condition
of the property and numerous other factors. Back to Top
Back to Top
What
is the difference between market value and appraised value?
Appraised value is a certified appraiser's opinion of the
worth of a home at a given point in time. Lenders require
appraisals as part of the loan application process; fees range
from $200 to $300. Market value is what price the house will
bring at a given point in time. A comparative market analysis
is an informal estimate of market value, based on sales of
comparable properties, performed by a real estate agent or
broker.
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Buying Real Estate
Do we
dig deep and buy a dream home or settle for a starter home?
Choosing between a smaller house in an affluent neighborhood,
an older, bigger house in a more working-class community or
a brand-new home is not easy. If you're in this situation,
start by examining your priorities and asking the following
questions: * Are the surrounding neighborhood or the home
itself the most important consideration? * Is each of the
neighborhoods safe? * Is quality of the schools an issue?
* Do any of the areas seem to attract more families with children
or adult residents? And where do you fit in? As for the return
on your investment, home-price appreciation is hard to predict.
In the late 1980s, the more expensive move-up housing appreciated
wildly. But during the recession that followed, smaller homes
tended to hold their value better than more expensive ones.
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How
do you choose between buying and renting?
Home ownership offers tax benefits as well as the freedom
to make decisions about your home. An advantage of renting
is not worrying about maintenance and other financial obligations
associated with owning property. There also are a number of
economic considerations. Unlike renters, home owners who secure
a fixed-rate loan can lock in their monthly housing costs
and make prudent investment plans knowing these expenses will
not increase substantially. Home ownership is a highly leveraged
investment that can yield substantial profit on a nominal
front-end investment. However, such returns depend on home-price
appreciation.
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Condominiums & Townhomes
Are
condominiums risky to buy?
While condos never had the kind of appreciation experienced
by single-family homes in the go-go 1980s, most ultimately
have not lost value, say some experts. And with high prices
in many urban markets and more single home buyers in the market
than ever before, the market for condos is strong. As with
any home purchase, you should do your homework about the neighborhood
or development before you buy. In the case of condominiums,
it is important to read the past six months of homeowners
association minutes to see how effective the board is and
to learn about any possibly detracting issues (such as protracted
litigation with the developer). The condominium community
has worked hard in the last few years to overcome image problems
brought on by disputes and lawsuits. Associations are becoming
more sophisticated about property management and taking steps
to prevent legal problems and disputes.
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How
do you choose between condos and single-family homes?
Using appreciation as a measure, condominiums in some areas
have been as profitable an investment as single-family homes
in the last five years. And in some markets, condos appreciated
even more, according to some experts. While single-family
homes have been the preferred investment by home buyers, changing
demographics are helping make condos more popular, especially
among single home buyers, empty nesters and first-time buyers
in high-priced markets. Also, the condominium community has
worked hard in the last few years to overcome image problems
brought on by homeowners association and developer disputes
as well as all too frequent construction-defect litigation.
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Escrow & Closing Costs
What
are closing costs?
Closing costs are the fees for services, taxes or special
interest charges that surround the purchase of a home. They
include upfront loan points, title insurance, escrow or closing
day charges, document fees, prepaid interest and property
taxes. Unless, these charges are rolled into the loan, they
must be paid when the home is closed.
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Who
pays the closing costs?
Closing costs are either paid by the home seller or home buyer.
Please review your sales contract to see what charges the
seller or the buyer is responsible for.
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Why
do I need a title report?
As much as you as a buyer may want to believe that the home
you have found is perfect, a clear title report ensures there
are no liens placed against the prior owners or any documents
that will restrict your use of the property. A preliminary
title report provides you with an opportunity to review any
impediment that would prevent clear title from passing to
you. When reading a preliminary report, it is important to
check the extent of your ownership rights or interest. The
most common form of interest is "fee simple" or
"fee," which is the highest type of interest an
owner can have in land. Liens, restrictions and interests
of others excluded from title coverage will be listed numerically
as exceptions in the report. You also may have to consider
interests of any third parties, such as easements granted
by prior owners that limit use of the property. Some buyers
attempt to clear these unwanted items prior to purchase. A
list of standard exceptions and exclusions not covered by
the title insurance policy may be attached. This section includes
items the buyer may want to investigate further, such as any
laws governing building and zoning.
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First
Time Buyers
How
do you choose between buying and renting?
Home ownership offers tax benefits as well as the freedom
to make decisions about your home. An advantage of renting
is not worrying about maintenance and other financial obligations
associated with owning property. There also are a number of
economic considerations. Unlike renters, home owners who secure
a fixed-rate loan can lock in their monthly housing costs
and make prudent investment plans knowing these expenses will
not increase substantially. Home ownership is a highly leveraged
investment that can yield substantial profit on a nominal
front-end investment. However, such returns depend on home-price
appreciation.
Back to Top
Home Inspections
Do I need
a home inspection?
Yes. Buying a home "as is" is a risky proposition.
Major repairs on homes can amount to thousands of dollars.
Plumbing, electrical and roof problems represent significant
and complex systems that are expensive to fix. Back to Top
How do I find a home inspector?
Your realtor is one source. Inspectors are listed in the yellow
pages. You can ask for referrals from friends. Ask for their
credentials, such as contractor's license or engineering certificate.
Also, check out their references.
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What's
a home inspection?
A home inspection is when a paid professional inspector --
often a contractor or an engineer -- inspects the home, searching
for defects or other problems that might plague the owner
later on. They usually represent the buyer and are paid by
the buyer. The inspection usually takes place after a purchase
contract between buyer and seller has been signed.
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Leveraging Your Money
What
is leveraging your money in Real Estate all about?
One of the greatest financial aspects of buying a home
is the ability to leverage your money. Simply put, leverage
allows you to use a small down payment and financing to purchase
a larger investment. For example, if you bought a $200,000
home with 10 percent down, you leveraged the $20,000 down
payment to purchase an asset worth 10 times that amount!
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Making an Offer
Is
a low offer a good idea?
While your low offer in a normal market might be rejected
immediately, in a buyer's market a motivated seller will either
accept or make a counteroffer. Full-price offers or above
are more likely to be accepted by the seller. But there are
other considerations involved: * Is the offer contingent upon
anything, such as the sale of the buyer's current house? If
so, a high offer, even at full price, may not be as attractive
as an offer without that condition. * Is the offer made on
the house “as is”, or does the buyer want the
seller to make some repairs or lower the price instead? *
Is the offer all cash, meaning the buyer has waived the financing
contingency? If so, then an offer at less than the asking
price may be more attractive to the seller than a full-price
offer with a financing contingency.
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What
are some tips on negotiation?
The more you know about a seller's motivation, the stronger
a negotiating position you are in. For example, a seller who
must move quickly due to a job transfer may be amenable to
a lower price with a speedy closing. Other so-called "motivated
sellers" include people going through a divorce or who
have already purchased another home. Remember, that the listing
price is what the seller would like to receive but is not
necessarily what they will settle for. Before making an offer,
check the recent sales prices of comparable homes in the neighborhood
to see how the seller's asking price stacks up. Some experts
discourage making deliberate low-ball offers. While such an
offer can be presented, it can also sour the sale and discourage
the seller from negotiating at all.
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What
contingencies should be put in an offer?
Most offers include two standard contingencies: a financing
contingency, which makes the sale dependent on the buyers'
ability to obtain a loan commitment from a lender, and an
inspection contingency, which allows buyers to have professionals
inspect the property to their satisfaction. A buyer could
forfeit his or her deposit under certain circumstances, such
as backing out of the deal for a reason not stipulated in
the contract. The purchase contract must include the sellers’ responsibilities, such things as passing clear title, maintaining
the property in its present condition until closing and making
any agreed-upon repairs to the property.
Back to Top
What
is the difference between list price, sales price and appraised
value?
The list price is a seller's advertised price, a figure
that usually is only a rough estimate of what the seller wants
to get. Sellers can price high, low or close to what they
hope to get. To judge whether the list price is a fair one,
be sure to consult comparable sales prices in the area. The
sales price is the amount of money you as a buyer would pay
for a property. The appraisal value is a certified appraiser's
estimate of the worth of a property, and is based on comparable
sales, the condition of the property and numerous other factors.
Back to Top
Mortgages & Financing
Are
interest rates negotiable?
Some
lenders are willing to negotiate on both the loan rate and
the number of points but this isn't typical among established
lenders who set their rates like large corporations set the
prices on their goods. Nevertheless, it pays to shop around
for loan rates and know the market before you go in to talk
to a lender. You should always look at the combination of
interest rate and points and get the best deal possible. The
interest rate is much more open to negotiation on purchases
that involve seller financing. These usually are based on
market rates but some flexibility exists. When shopping for
rates look for published rates in local newspapers or check
the growing number of Internet sites that publish such information.
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How
do adjustable-rate loans change?
Adjustable-rate mortgages go up and down with interest
rates, based on several money market indexes which cause the
cost of funds for lenders to vary. Several popular indexes
include Treasury Securities, Certificates of Deposit, and
Libor (London inter-bank offered rate). Most big city newspapers
publish ARM index rates. The interest rate and payment adjustments
do not always coincide. There is usually a lag. There are
a variety of consumer protections built into these loans.
But consumers need to beware of advertising and other claims
made by lenders.
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How
do you choose between fixed and adjustable rates?
There is risk involved in selecting an adjustable rate
mortgage, or ARMs, because rates may go up. On the other hand,
a fixed-rate loan offers good protection against rising interest
rates but the borrower is stuck with the initial rate if interest
rates drop. Statistics show that home buyers who have chosen
ARMs since 1981 have saved thousands of dollars. For a period,
the percentage of home buyers applying for ARMs rose substantially,
then buyers and homeowners began flocking to fixed-rate loans.
Whether to opt for a fixed or adjustable rate mortgage is
a matter of personal choice. The first route offers stable
payments; the second offers lower initial payments. Another
consideration is the length of time a buyer plans to own the
home. If you're planning on moving within three or four years,
an ARM makes sense even if rates do nothing but rise during
that period of time.
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What
are the most popular ARM indices?
Among the most common indexes Treasury Securities (T-Bills),
Certificates of Deposit (CDs), and Libor (London inter-bank
offered rate). Most metropolitan newspapers publish current
ARM index rates.
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What
is the value of a mortgage lock-in?
Locking in a mortgage rate with a lender is one way to
ensure that same rate still will be available when you need
it. Lock-ins make sense when borrowers expect rates to rise
during the next 30 to 60 days, which is the usual length of
time lock-ins are available. A lock-in given at the time of
application is useful because it may take the lender several
weeks or longer to prepare a loan application (though automated
loan practices are cutting this time dramatically). However,
some lenders require borrowers to pay lock-in fees to assure
particular rates and terms. Be sure to check that the rates
and points are guaranteed and that your lock-in period is
long enough. If your lock-in expires, most lenders will offer
the loan based on the prevailing interest rate and points.
Lenders may have preprinted forms that set out the exact terms
of the lock-in agreement. Others may only make an oral lock-in
promise on the telephone or at the time of application.
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Where
are interest rates headed?
No one knows for sure where rates are headed. Beyond
public policies put in place by the Federal Reserve Board,
there are no laws that govern mortgage rates. Historically,
usury laws were used to prevent lenders from charging sky-high
interest rates when lending money. But in some states where
there are usury laws, banks, thrifts and a number of other
financial institutions are exempt from the law. Today, interest
rates are governed solely by the financial markets and by
Federal Reserve Board action, neither of which can be predicted
with absolute certainty.
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New Homes & Vacation Homes
Can you negotiate
the price on new homes?
It can be difficult to negotiate the sales price with
a developer because they may claim their prices are based
on fixed construction costs. But it doesn't hurt to try. Experts
say builders are more likely to be flexible on price at the
very beginning and the very end of a development project.
Early on, most developers want to move people in quickly so
the project picks up momentum. Later, developers may be more
inclined to accept lower offers when only a few units remain.
If negotiating the price doesn't work, buyers commonly negotiate
for better amenities (upgrade carpet, light fixtures, etc.)
or lot location. Experts say a developer will rarely pass
up a deal over a couple hundred dollars' worth of carpeting,
for example.
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Should
I buy a vacation home?
Today a vacation home can be purchased for investment
purposes as well as enjoyment. And yes, there are tax benefits.
Some people buy a vacation home with the idea of turning it
into a permanent retirement home down the road, which puts
them ahead on their payments. Another benefit is that the
interest and property taxes are tax deductible, which helps
to offset the cost of paying for a second home. A vacation
home also can be depreciated if you live in it less than 14
days a year.
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New Home Construction
Should I
hire a home inspector for a new home?
Most experts recommend having a home inspected, new or
old. For a new home, ask the builder to provide copies of
any inspection reports on the property, architectural plans,
surveys and pertinent construction documents for your inspector
to review. Your inspector should either be a professional
home inspector, an engineer, an architect or a contractor.
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Pre-construction condominiums
What are the
advantages in purchasing your property pre-construction?
Historically purchasing your property pre-construction
in South Florida has been very attractive for homebuyers and
investors. With the fast population growth in the state and
the diminishing availability of buildable residential land,
prices are rising at an astronomical pace. Today with a volatile
stock market, real estate is a highly attractive investment
opportunity. It’s a tangible investment, and you can
leverage your cash with the attractive financing programs
available. When you purchase your property pre-construction,
you can reserve the property at today’s price until
the closing date (often 1 - 3 years). If you buy at the beginning
you typically can select a prime location and take advantage
of builder incentives! The most important factor is to know
which development is offering the best value at the time you
are ready to purchase. This is where an experienced broker
in pre-construction sales can guide you in making the right
buying decision. They are constantly monitoring the market,
seeking out the very best opportunities for their customers.
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How
can I find out about Pre-construction projects prior to public
offering?
You need to be in contact with a broker that specializes
in the pre-construction sales market. >
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What
down payment is required to reserve a property pre-construction?
If you are looking to buy a condo, the developers normally
require 10% at the reservation contract and another 10% at
start of construction. If you are looking for a single family
home or townhome, the builder normally requires only 10% at
contract.
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Selling Real Estate
How
do you prepare a house to sell?
Doing whatever you can to put your house's best face
forward is very important if you want to get close to your
asking price or sell as quickly as possible. Short of spending
a lot of money, there are several steps people can take to
make their home show better: * Sweep the sidewalk, mow the
lawn, prune the bushes, weed the garden and clean debris from
the yard. * Clean the windows (both inside and out) and make
sure the paint is not chipped or flaking. And speaking of
paint, if your home was built before 1978, new federal law
gives a buyer the right to request a lead inspection. If you
think you might have some problems, do the inspection yourself
beforehand and make any fixes you can. * Be sure that the
doorbell works. * Clean and spruce up all rooms, furnishings,
floors, walls and ceilings. It's especially important that
the bathroom and kitchen are spotless. * Organize closets.
* Make sure the basic appliances and fixtures work. Get rid
of leaky faucets and frayed cords. * Make sure the house smells
good: from an apple pie, cookies baking or spaghetti sauce
simmering on the stove. Hide the kitty litter. * Put vases
of fresh flowers throughout the house. * Having pleasant background
music playing in the background also will help set your stage.
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How
does someone sell a slow mover?
Even in a down market, real estate experts say that price
and condition are the two most important factors in selling
a home. The first step is to lower the price. Also, go through
the house and see if there are cosmetic defects that you missed
and can be repaired. Secondly, home sellers should make sure
that the home is getting the exposure it deserves through
open houses, broker open houses, advertising, good signage
and a listing on the multiple listing service (MLS). Another
option is to pull the home off the market and wait for the
market to improve. Finally, frustrated sellers who have no
equity and are forced to sell because of a divorce or financial
considerations could discuss a short sale or a deed in lieu
of a foreclosure with the mortgage lender. A short sale is
when the seller finds a buyer for a price that is below the
mortgage amount and negotiates the difference with the lender.
In a deed-in-lieu-of-foreclosure situation, the lender agrees
to take the house back without instituting foreclosure proceedings.
But these would be considered more radical options than lowering
the price.
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How
is the price set?
It's very important to price your home appropriately
relative to current market conditions. Because the real estate
market is continually changing, and market fluctuations have
an effect on property values, it's imperative to select your
list price based on the most recent comparable sales in your
neighborhood. A comparative market analysis provides the background
data on which to base your list-price decision. Study the
comparable sales material presented to you by the different
agents you interviewed initially. If the analyses are more
than two or three months old, have your agent update the report
for you. If all agents agreed on a price range for your home,
go with the consensus. Watch out for an agent whose opinion
of value is considerably higher than the others.
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What
are the standard ways of finding out what a house is valued
at?
A comparative market analysis and an appraisal are the
standard ways consumers, lenders and Realtors determine what
a home is worth. Your real estate agent will be happy to provide
a comparative market analysis, an informal estimate of value
based on comparable sales in the neighborhood. You also can
research "the comps" yourself by checking on recent
sales in public records. Be sure that you are researching
properties that are similar in size, construction and location.
This information is not only available at your local recorder's
or assessor's office but also through private companies and
on the Internet. An appraisal, which generally cost $300 to
$400 to perform, is a certified appraiser's opinion of the
value of a home at any given time. Appraisers review numerous
factors including recent comparable sales, location, square
footage and construction quality.
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What
are the two most important factors when selling a home?
Even in a down market, real estate experts say price
and condition are the two most important factors in selling
a home. So, the first step is to lower the price. Also, go
through the house and see if there are cosmetic defects that
you missed and can be repaired. Home sellers should make sure
that the home is getting the exposure it deserves through
open houses, broker open houses, advertising, good signage
and a listing on the local multiple listing service. If the
seller is using a real estate agent and the property isn't
getting proper exposure, find another agent.
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What
is the difference between list and sales prices?
The list price is the price tag put on a house in a real
estate listing; it usually is only an estimate of what the
seller would like to get for the property. The sales price
is the amount a property actually sells for. It may be the
same as the listing price, or higher or lower, depending on
how accurately the property was originally priced and on market
conditions. A seller may need to adjust the listing price
if there have been no offers within the first few months of
the property's listing period.
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Where
do I get information on housing market stats?
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.
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What Can I Afford?
How
long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies
and foreclosures can remain on a credit report for seven to
10 years. Some lenders will consider a borrower earlier if
they have re-established 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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What
can I afford?
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 pre-qualify 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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