Before You Look at Your First House

Experienced home buyers know that one of the first steps in beginning a successful search for a new house is taking a hard, objective look at finances. Determining how much money you can dedicate to the purchase of your new house affects almost every aspect of buying a new home - including how we write the offer, which mortgage programs you will qualify for, shopping for the best mortgage loan and which homes are truly in your price range.



Here are the questions that each home buyer should ask:

  • How much cash is available for a down payment? The amount you have available for a down payment will affect what types of loans for which you can qualify. Learn more.
  • Am I ready to write a check for the earnest money? Earnest money is a cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
  • How much additional cash will be available to pay for closing costs? There are certain standard costs associated with closing the sale of a house. These fees are split between the buyer and the seller, as spelled out in the sales contract. Learn more.
  • What is the maximum monthly mortgage payment that I can afford? Most lenders will use the 28/36 rule to determine the maximum mortgage payment you can afford.

The 28/36 Rule
No more than 28% of your gross income can be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income can be applied to your mortgage expenses plus your regular debt expenses (car payments, credit cards, other loans, etc.).*

Note:  Although these are a good "rule of thumb" in determining what you can afford and qualify for, there are a lot of factors that influence these rations including number ofpeople in the household; down payment, job stability, credit scores for all of the parties that will be on the loan, etc; and other factors.  It is best to talk to a mortgage professional that has at least 5 years recent experience in the industry, and I would recommend they have at least 10 years experience minimum.  Also, the price range of the house you want to purchase will determine if you will need to be considering FHA government backed financing or going with Conventional financing.  The FHA qualifying rations are different, and may be more flexible as far as the 28/36 rule depending on the other factors I mentioned in the prior sentence.  You may can qualify for more as far as the sales price on an FHA loan, but the maximum sales price is lower since the maximum loan amounts for FHA in the Dallas Metroplex are lower than the maximum loan amounts for Conventional financing in the DFW Metroplex. 

If you are a military veteran, firefighter or member of the local police, as well as a degreed educational professional, there are other programs that, if you qualify for the specific conditions of the program based on these things or occupations, your qualifying rations may also be more flexible than the 28/36 rule that is used mostly by conventional financing standards.  So, again, it may pay to talk to some knowledgable, experienced mortgage professionals (mortgage loan officers) to find out where you would be able to get the best financing plan that works for your family's situation.

I have been a fulltime Texas real estate broker in most of the cities, towns and communities in the North Dallas, Collin County and Denton County areas of the Metroplex, and know many experienced, mortgage professionals.  If you need more information about your financing options, please call me at 972-612-2277 for assistance. 

Jeanie Elliott, Broker/Owner

Jeanie Elliott, Inc. REALTORS, Since 1980.

 

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