Copyright © Chantal McBride
http://www.WebTD.com
You can use two techniques to get a lenders opinion of your creditworthiness as a borrower. One is generally the better way to go while the other is potentially a waste of your time and money and can be incredibly misleading.
We will begin with the second method which is the prequalification method. This method is nothing more than a conversation with a loan officer in which they ask some questions about some basic financial matters such as your present income, expenses, and savings for a down payment. The loan officer then guesstimates approximately how much a lender might lend you at the current interest rates assuming everything you have said is accurate. Prequalification is fast and free.
Loan preapproval is much more involved and accurate than the prequalification process. The preapproval process involves a thorough investigation of your credit history. The lender reviews all necessary documents to verify your present income and expenses, the amount of cash you have on hand, assets and liabilities, and even your prospects for continued employment. This could take up to a week or two, but it is time well spent. Once preapproved for a mortgage loan you have two huge advantages.
You know exactly how much you can borrow. It’s almost like having a line of credit to go house hunting with. The amount you have been preapproved for is written on paper, but the lender will not give you a firm commitment on your loans interest rate until you have a signed contract to buy your new home. If the interest rate fluctuates while you are looking for your home, the amount that you have been preapproved to borrow will also change.
You have an advantage in multiple offer situations. If you are competing with other buyers to buy a property, being preapproved is proof to the seller that you are a real buyer. Your offer will be considered more seriously than those who have not bothered to prove their creditworthiness.
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To find the best home loan with the best rate so you can save a ton of money visit:
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Wednesday, March 7, 2007
Tuesday, March 6, 2007
The Down-Payment Decision
Copyright © Chantal McBride
http://www.WebTD.com
Today I am going to discuss how to figure out what type of down payment one should make when purchasing a new property. With most lenders you will get access to the best rates on mortgage loans by making a larger down payment. Your options and goals are factors to consider when figuring out whether a larger down payment makes sense for you.
For financial reasons, it is important to consider the interest rate you are paying on your mortgage versus the rate of return your investments are generating. For example, let’s say you get a fixed rate mortgage at 6 percent. In order for you to come out financially ahead, your investments need to produce an average annual rate of return, before taxes, of about 6 percent.
It is also important to consider the tax impact. It is true that mortgage interest is usually tax deductible, but don’t assume that those deductions are that great. Many people don’t realize that they have lost their ability to fully deduct their mortgage interest on their tax returns. It is possible to lose up to 80 percent of your mortgage interest deductions by exceeding the set bracket on your adjusted gross income (taxable income from all sources before subtracting itemized deductions and personal exemptions.)
In order for you to have a reasonable chance of earning more on your investments than it’s costing you to borrow on your mortgage, you must be investing in more growth oriented investments such as stocks and investment real estate endeavors. In general, stocks and real estate investments produce annual average rates of about 10 percent, but there is no guarantee that you will actually earn these returns. Growth type investments can easily drop 20 percent or more over a short period of time.
It is not wise to make a larger down payment if you are not taking advantage of contributing to tax deductible retirement accounts such as 401(k) s and 403(b) plans. Doing so will give you no tax benefits and will make it difficult for you to take advantage of the tax reduction accounts.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
-----------------------------------------------------------------
http://www.WebTD.com
Today I am going to discuss how to figure out what type of down payment one should make when purchasing a new property. With most lenders you will get access to the best rates on mortgage loans by making a larger down payment. Your options and goals are factors to consider when figuring out whether a larger down payment makes sense for you.
For financial reasons, it is important to consider the interest rate you are paying on your mortgage versus the rate of return your investments are generating. For example, let’s say you get a fixed rate mortgage at 6 percent. In order for you to come out financially ahead, your investments need to produce an average annual rate of return, before taxes, of about 6 percent.
It is also important to consider the tax impact. It is true that mortgage interest is usually tax deductible, but don’t assume that those deductions are that great. Many people don’t realize that they have lost their ability to fully deduct their mortgage interest on their tax returns. It is possible to lose up to 80 percent of your mortgage interest deductions by exceeding the set bracket on your adjusted gross income (taxable income from all sources before subtracting itemized deductions and personal exemptions.)
In order for you to have a reasonable chance of earning more on your investments than it’s costing you to borrow on your mortgage, you must be investing in more growth oriented investments such as stocks and investment real estate endeavors. In general, stocks and real estate investments produce annual average rates of about 10 percent, but there is no guarantee that you will actually earn these returns. Growth type investments can easily drop 20 percent or more over a short period of time.
It is not wise to make a larger down payment if you are not taking advantage of contributing to tax deductible retirement accounts such as 401(k) s and 403(b) plans. Doing so will give you no tax benefits and will make it difficult for you to take advantage of the tax reduction accounts.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
-----------------------------------------------------------------
Monday, March 5, 2007
Analyzing Your Spending Characteristics
Copyright © Chantal McBride
http://www.WebTD.com
When most Americans examine there spending, especially if it is the first time, they may be surprised at the amount of their overall spending and how little they are saving. How does one know how much is enough to save? The answer depends upon your goals and how good your investing skills are. For most people to reach their financial goals, they must save at least 10 percent of their gross (pretax) income.
Most people who are planning to buy a first home need to reduce their spending in order to accumulate enough money to pay for their down payment, closing costs and create enough slack in their budget to pay for the extra costs of homeownership. Here are some proven ways to cut your spending now and in the future.
Purge consumer debt - Credit card debt, auto loans, and other debts along those lines are detrimental to your long-term financial health. Consumer loans encourage you to live beyond your means and the interest rates are high and are not tax deductible. If possible pay down your consumer debt.
Trim non essential spending - Americans spend a great deal of additional money on luxuries and nonessentials. Even some of what people spend on what they would consider “necessities” is partly for luxury.
Purchase products and services that offer value - High quality doesn’t have to cost more. In fact, the higher priced products and services are sometimes inferior to lower cost alternatives.
Buy in bulk - Most items are cheaper per unit when bought in larger quantities or sizes. You can save a lot of money on bulk items bought at superstores such as Costco and Walmart.
Keep in mind, cutting back on spending does not mean you have to adjust to a lower quality of life. If done properly, you can live a very comfortable, fulfilled lifestyle without spending as much.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
-----------------------------------------------------------------
http://www.WebTD.com
When most Americans examine there spending, especially if it is the first time, they may be surprised at the amount of their overall spending and how little they are saving. How does one know how much is enough to save? The answer depends upon your goals and how good your investing skills are. For most people to reach their financial goals, they must save at least 10 percent of their gross (pretax) income.
Most people who are planning to buy a first home need to reduce their spending in order to accumulate enough money to pay for their down payment, closing costs and create enough slack in their budget to pay for the extra costs of homeownership. Here are some proven ways to cut your spending now and in the future.
Purge consumer debt - Credit card debt, auto loans, and other debts along those lines are detrimental to your long-term financial health. Consumer loans encourage you to live beyond your means and the interest rates are high and are not tax deductible. If possible pay down your consumer debt.
Trim non essential spending - Americans spend a great deal of additional money on luxuries and nonessentials. Even some of what people spend on what they would consider “necessities” is partly for luxury.
Purchase products and services that offer value - High quality doesn’t have to cost more. In fact, the higher priced products and services are sometimes inferior to lower cost alternatives.
Buy in bulk - Most items are cheaper per unit when bought in larger quantities or sizes. You can save a lot of money on bulk items bought at superstores such as Costco and Walmart.
Keep in mind, cutting back on spending does not mean you have to adjust to a lower quality of life. If done properly, you can live a very comfortable, fulfilled lifestyle without spending as much.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
-----------------------------------------------------------------
Friday, March 2, 2007
How To Calculate Your Mortgage Payment Amount
Copyright © Chantal McBride
http://www.WebTD.com
Calculating the amount you want to borrow is pretty straight forward once you know the amount you want to borrow. The challenge is figuring out the amount you can comfortably afford to borrow given your other financial goals.
Suppose you evaluated your budget and determined you could comfortably afford to pay $3000 a month on housing expenses. To determine the exact size of mortgage that allows you to stay within this boundary, you need to consider several components: mortgage payments, property taxes, insurance and maintenance.
Property taxes are typically based on the value of your property. You can figure out the exact rate by contacting the local tax collector’s office in the town where you are contemplating buying property. (You can find the number in the government section of the local phone directory.)
When you own a home with a mortgage, your mortgage lender will insist that you have adequate homeowners insurance before funding your loan. The cost of your insurance policy is largely derived from the cost of rebuilding your home. Buy the most comprehensive homeowners coverage you can and take the highest deductible that you can afford, to minimize the cost.
To budget the maintenance cost, I suggest you allocate about 1 percent of the purchase price per year. In situations where you pay monthly dues to a homeowners association, the maintenance for the complex is taken care of. Checks with the association to find out how much the dues are.
Now you should have a pretty good understanding of what you need to consider for your mortgage payment amount. I hope you find this information helpful when deciding what pricing bracket fits within your budget.
About the Author:
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To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
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Thursday, March 1, 2007
Understanding Lenders’ Ratios
Copyright © Chantal McBride
http://www.WebTD.com
All that mortgage lenders can do is tell you there own criteria for approving and denying mortgage applications and calculating the maximum that you are able to borrow. For a property that you are considering to buy, the lender calculates the housing expenses and normally requires that it does not exceed 40 percent of your monthly before tax (gross) income. If you are self employed and complete a 1040 form, schedule C, mortgage lenders use your after expenses (net) income, from the bottom of schedule C.
Take into consideration that this housing expense ratio completely ignores almost all your other financial goals, needs and obligations as well as property maintenance and remodeling expenses which can consume a lot of a homeowner’s cash.
In addition to your income, a lender also considers all of your debts. Specifically, a lender also considers all your monthly payments for other debts you may have. These debts may be student loans, auto loans and credit card bills. In addition to the percentage of your income that lenders allow for expenses, they typically allow an additional 5 percent to go toward other debt repayments.
As you now see, lenders’ are mainly concerned about your ability to repay your mortgage loan. They want to be sure their investment is secure. Now that you have a basic understanding as to how lenders’ ratios work we can explore how to calculate your mortgage payment amount. Check out my next blog where you will learn exactly how to calculate your monthly payment.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
-----------------------------------------------------------------
http://www.WebTD.com
All that mortgage lenders can do is tell you there own criteria for approving and denying mortgage applications and calculating the maximum that you are able to borrow. For a property that you are considering to buy, the lender calculates the housing expenses and normally requires that it does not exceed 40 percent of your monthly before tax (gross) income. If you are self employed and complete a 1040 form, schedule C, mortgage lenders use your after expenses (net) income, from the bottom of schedule C.
Take into consideration that this housing expense ratio completely ignores almost all your other financial goals, needs and obligations as well as property maintenance and remodeling expenses which can consume a lot of a homeowner’s cash.
In addition to your income, a lender also considers all of your debts. Specifically, a lender also considers all your monthly payments for other debts you may have. These debts may be student loans, auto loans and credit card bills. In addition to the percentage of your income that lenders allow for expenses, they typically allow an additional 5 percent to go toward other debt repayments.
As you now see, lenders’ are mainly concerned about your ability to repay your mortgage loan. They want to be sure their investment is secure. Now that you have a basic understanding as to how lenders’ ratios work we can explore how to calculate your mortgage payment amount. Check out my next blog where you will learn exactly how to calculate your monthly payment.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money visit:
http://www.WebTD.com
-----------------------------------------------------------------
Tuesday, February 27, 2007
How To Determine Your Potential Homeownership Expenses
Copyright © Chantal McBride
http://www.WebTD.com
If you’re in the market to buy your first home, you probably don’t have a clear sense about the costs of homeownership. Even people who presently own a home and are considering trading up often don’t have a handle on their current or likely future homeownership expenses. This article will help you understand your likely homeownership costs.
Mortgage Payments
A mortgage is a loan you take out to finance the purchase of your home. Mortgage loans are generally paid in monthly installments over a 15-, 30 or even up to a 50 year time span.
In the early years of repaying your mortgage, nearly all of your mortgage payment goes toward paying interest on the money you borrowed. The later years of your mortgage are when you begin to rapidly pay down your loan balance ( the principal).
Property Taxes
Property taxes are typically based on the value of the property. Because property taxes vary from one locality to another, call the relevant local tax collector’s office in the area you wish to purchase property. They will be able to tell you the exact rate in your area. (You should be able to find the phone number in the government section of your local phone directory.) In addition to inquiring about the property tax rate, also ask what additional fees and assessments apply.
Tax Write Offs
Thank goodness for the tax benefits of homeownership. The federal tax authorities at the Internal Revenue Service (IRS) and most state governments allow you to deduct mortgage interest, and property taxes when you file your annual income tax return. You may deduct the interest on the first $1,000,000 of mortgage debt as well as all the property taxes. The IRS also allows you to deduct the interest costs on second mortgages known as home equity loans (HELOCS) to a maximum of $100,000 borrowed.
Insurance
When you own a home with a mortgage, your lender will insist as a condition of funding your loan that you have adequate homeowners insurance. The cost of your insurance policy is largely derived from the estimated cost of rebuilding your home. Buy the most comprehensive homeowners insurance coverage you can and take the highest deductible that you can afford to help minimize the costs.
Budgeting For Closing Costs
As you budget for a given home purchase, don’t forget to account for the inevitable one-time closing cost fees. Typically, closing costs amount to 2 to 5 percent of the purchase price of the property. Thus, you shall not ignore to budget the closing costs as well as the amount needed for a down payment when calculating how much money is needed to close the deal.
Maintenance Costs
In addition to your mortgage payment, your house will need painting, roof repairs, and other types of maintenance over time. For budgeting purposes, you should allocate about 1 percent of the purchase price of your home each year for maintenance expenses.
With some types of housing, such as condos and town homes, you pay monthly dues into a homeowner’s association, which takes care of a good chunk of your maintenance fees. In that case, you’re only responsible for maintaining the interior of your unit.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money each month visit:
http://www.WebTD.com
-----------------------------------------------------------------
http://www.WebTD.com
If you’re in the market to buy your first home, you probably don’t have a clear sense about the costs of homeownership. Even people who presently own a home and are considering trading up often don’t have a handle on their current or likely future homeownership expenses. This article will help you understand your likely homeownership costs.
Mortgage Payments
A mortgage is a loan you take out to finance the purchase of your home. Mortgage loans are generally paid in monthly installments over a 15-, 30 or even up to a 50 year time span.
In the early years of repaying your mortgage, nearly all of your mortgage payment goes toward paying interest on the money you borrowed. The later years of your mortgage are when you begin to rapidly pay down your loan balance ( the principal).
Property Taxes
Property taxes are typically based on the value of the property. Because property taxes vary from one locality to another, call the relevant local tax collector’s office in the area you wish to purchase property. They will be able to tell you the exact rate in your area. (You should be able to find the phone number in the government section of your local phone directory.) In addition to inquiring about the property tax rate, also ask what additional fees and assessments apply.
Tax Write Offs
Thank goodness for the tax benefits of homeownership. The federal tax authorities at the Internal Revenue Service (IRS) and most state governments allow you to deduct mortgage interest, and property taxes when you file your annual income tax return. You may deduct the interest on the first $1,000,000 of mortgage debt as well as all the property taxes. The IRS also allows you to deduct the interest costs on second mortgages known as home equity loans (HELOCS) to a maximum of $100,000 borrowed.
Insurance
When you own a home with a mortgage, your lender will insist as a condition of funding your loan that you have adequate homeowners insurance. The cost of your insurance policy is largely derived from the estimated cost of rebuilding your home. Buy the most comprehensive homeowners insurance coverage you can and take the highest deductible that you can afford to help minimize the costs.
Budgeting For Closing Costs
As you budget for a given home purchase, don’t forget to account for the inevitable one-time closing cost fees. Typically, closing costs amount to 2 to 5 percent of the purchase price of the property. Thus, you shall not ignore to budget the closing costs as well as the amount needed for a down payment when calculating how much money is needed to close the deal.
Maintenance Costs
In addition to your mortgage payment, your house will need painting, roof repairs, and other types of maintenance over time. For budgeting purposes, you should allocate about 1 percent of the purchase price of your home each year for maintenance expenses.
With some types of housing, such as condos and town homes, you pay monthly dues into a homeowner’s association, which takes care of a good chunk of your maintenance fees. In that case, you’re only responsible for maintaining the interior of your unit.
About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money each month visit:
http://www.WebTD.com
-----------------------------------------------------------------
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