Wednesday, January 2, 2013

Finding Your Home in Fairfax Country in 2013


With many choices and options when buying a home in Fairfax Country how do you settle or make a choice?  The biggest and most important thing to consider is price. Always start with a price range!

Mortgage lenders are concerned with your ability to repay the mortgage especially in today’s economy. To determine if you qualify for a loan, they will consider your credit history, your monthly gross income and how much cash you have for a down payment. Start saving!  Have around 20 to 30 percent of the home’s cost to have for a down payment.

The standard debt-to-income ratios are the housing expense ratio or front-end, ratio shows how much of your gross monthly income would go toward the mortgage payment. Your monthly mortgage payment, including principal, interest, real estate taxes and homeowners insurance, should not exceed 28 percent of your gross monthly income. To calculate your housing expense ratio, multiply your annual salary by 0.28, then divide by 12 (months). The answer is your maximum housing expense ratio.
The back-end ratio is the total debt-to-income, that shows how much of your gross income would go toward all of your debt obligations, including mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees. Your total monthly debt obligation should not exceed 36 percent of your gross income. To calculate your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12 (months). The answer is your maximum allowable debt-to-income ratio.
When looking at Conventional loans your housing costs should be 26 to 28 percent of monthly gross income. FHA loans housing costs would be 29 percent of monthly gross income. 

In addition, lenders include the cost of taxes and insurance when calculating how much house you can afford.  Property taxes are part of your monthly mortgage payment, it is important to get an estimate of what yours would be.  Ask your real estate agent for the rates that apply in the area you want to buy. You must insure your property to obtain a mortgage monthly payment. Be sure to inquire about special requirements for hazard insurance, such as mandatory coverage for floods, earthquakes or wind. If you put down less than 20 percent of your home's value, you also will have to obtain mortgage insurance or take out a second loan, called a piggyback loan, to bring the first mortgage down to 80 percent of the purchase price. Both alternatives will raise your monthly payment.

If you need more information or help determining how much you can afford, please don't hesitate to contact me with any questions.  I am here to help!

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