What does Debt to Income Ratio really mean?

Debt To Income Formula with Laura Hill at Local Katy Realty
Debt To Income Formula

DEBT-TO-INCOME (DTI)

This is a VERY important & critical part of the affordability process that determines what you can or cannot afford. Your DTI is expressed as a percentage & is your total “minimum” monthly debt divided by your gross monthly income. Lenders have different guidelines that they follow*. The conventional limit for DTI is 36% of your monthly income, but this could be as high as 43% for some loans. A DTI of 20% or below is considered excellent & although this would be awesome & save you a lot of money, it’s also rare, so don’t think you have to have your DTI at or near 20% before you begin.

 

It’s in part what all financiers use to determine your financial qualifications. In reality, lenders evaluate how much additional debt you can handle & how much of a credit risk you pose. It’s a common practice in the finance world, but usually home buyers are unaware of this critical information. It’s a valuable formula for everyone & easy to determine. The Debt to Income ratio is used with consumer loans, credit cards, loan officers & other financial institutions.

 

To calculate your ratio:
1. Determine your monthly debts, which will include your new house payment, & other monthly debts like credit card minimum payments, student loans, car loans, alimony, child support, personal loan, etc.
2. Now divide this number by your gross monthly income including all income that can be documented through pay stubs or your tax return. You can use a mortgage calculator to help you with your estimation.

The formula is:

Debt to Income = Monthly Debt Payments  ÷  Gross Monthly Income

For example, if you have a $3,400 monthly gross income.

$3,400 (gross monthly income) X .36 (generally recommended maximum DTI)

= $1,224 (amount your total monthly debt payments should generally not exceed)

 

*IMPORTANT: The standard rule of thumb is that your DTI ratio should be less than 36 % since lenders generally require that borrowers have a DTI ration no higher than 40% in order to qualify for a mortgage. A DTI ratio as high as 36% puts you at risk of paying higher interest rates or being denied altogether. Note that certain types of mortgages may allow a DTI ratio above 40%, such as certain Federal Housing Authority & Veterans Administrative mortgages.

 

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. https://www.localkatyrealty.com

832-771-1314

 

How much house can I afford?

How much house can I afford with Laura Hill at Local Katy Realty
How much house can I afford?

“How much house can I afford?” is a question we hear frequently from those looking to purchase a new home. The mortgage you can afford depends on many factors, including annual income, & down payment amount.

However, before you begin looking for a home, you should get a full preapproval or more commonly called a “Pre-approval Letter” from a lender based on verification of your credit & income, because that will give you a more accurate idea of how much you can borrow.

In order to qualify you for a loan & determine your interest rate, a lender will look at a variety of factors, including your income, assets, down payment, credit score, debts & job history. The higher your credit score, the lower your interest rate will be for conventional loans, which in turn means your payment will be lower. To break down the details more, here is a list to consider:

ANNUAL INCOME
This is the combined annual income for you & your co-borrower. Include all income before taxes, including base salary, commissions, bonuses, overtime, tips, rental income, investment income, alimony, child support, etc.

DOWN PAYMENT
This is the amount of money you will put towards a down payment on the house. Make sure you still have cash left over after the down payment to cover unexpected repairs or financial emergencies.

MONTHLY DEBT
Include all of your & your co-borrower’s monthly debts, including: minimum monthly required credit card payments, car payments, student loans, alimony/child support payments, rental property maintenance, & other personal loans.

DEBT-TO-INCOME (DTI)
This is a VERY important & critical part of the affordability process that determines what you can afford or not. Your DTI is expressed as a percentage & is your total “minimum” monthly debt divided by your gross monthly income. Lenders have different guidelines that they follow. The conventional limit for DTI is 36% of your monthly income, but this could be as high as 43% for some loans. A DTI of 20% or below is considered excellent & although this would be awesome & save you a lot of money, it’s also rare, so don’t think you have to have your DTI at 20% before you begin.
To calculate your ratio, determine your monthly debts, which will include your new house payment, & other monthly debts like credit card minimum payments, student loans, car loans, alimony, child support, personal loan, etc. Now divide this number by your gross monthly income including all income that can be documented through paystubs or your tax return. You can use a mortgage calculator to help you with your estimation.

PROPERTY TAXES
The value represents an annual tax on homeowners’ property & the tax amount is based on the home’s value.

HOMEOWNERS INSURANCE
Commonly known as hazard insurance, most lenders require insurance to provide damage protection for your home & personal property from a variety of events, including fire, lightning, burglary, vandalism, storms, explosions, etc.

MORTGAGE INSURANCE (PMI)
Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home’s purchase price. It protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. This is commonly referred to as PMI (Private Mortgage Insurance).

HOA DUES
HOA fees are to cover common amenities or services within the property such as garbage collection, landscaping, neighborhood pool maintenance, etc.

So, this gives you a clear, concise idea of what you need to do to get an accurate figure of what you can afford to buy a home or property.

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. https://www.localkatyrealty.com

832-771-1314

Learn more about Local Katy Realty with Laura Hill

Learn more about Local Katy Realty with Laura Hill.
Learn more about Local Katy Realty with Laura Hill.

 

 

 

 

 

 

 

 

 

 

 

 

 

Learn more about Local Katy Realty with Laura Hill

If you are looking for homes for sale in Katy, Tx then look no further, because Laura Hill is an experienced, savvy, well-informed Realtor® that works primarily on the west side of the Houston Metropolitan area. The west side coverage area includes Katy, Sugar Land, Richmond, Fulshear, Rosenberg, Cypress & The Woodlands. Laura advises & helps her clients buy/sell properties, land & homes in all areas of the west side, but she focuses a large portion of her work in real estate of Katy, Tx. The real estate in Katy is an area Laura is very familiar with; she has expertise knowledge of the town, land, properties, schools, businesses & valuable insights in “how to” & “how not to” buy & sell your real estate in Katy. One of Laura’s key advantages in regard to buying & selling homes for her clients is her expert, precision pricing for the homes in question via a Comparative Market Analysis as well as her knowledge from her years of experience of what price will work (& what will not work) from day one! That is a critical element in getting a home sold quickly or bidding for a home that’s for sale. Because when “priced right” most homes for sale in Katy, Tx, as well as most areas of the country, will occur within the first 14 days of being on the market. Laura’s track record of closings or sales consistently gives her clients 95% of their asking price within an average time of Days On the Market of 26 days.

 

Headquartered in Katy, Tx, Laura Hill is a Realtor with RE/MAX Cinco Ranch & works both in commercial & residential properties.
Laura’s real estate resources are worldwide, but her professional services are right here at home in our Katy & Houston Westside
neighborhoods including The Woodlands, Cypress, & Sugar Land communities.

 

Laura’s business philosophy is so much more than about real estate. It is about helping your life & dreams come true.
Laura provides her clients with comprehensive services to meet their unique needs & ensure the success of their dreams.

 

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. https://www.localkatyrealty.com

832-771-1314

Neighborhood Open House in Kingdom Heights

Neighborhood Open House. Come walk thru all of these homes in Kingdom Heights – 1:00 – 3:00 p.m. – Saturday, August 13, 2016.

Open Houses Tour this Saturday with Laura Hill at Local Katy Realty
Open Houses Tour this Saturday!
Open House Map with Laura Hill at Local Katy Realty
Open House Map

 

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. http://www.localkatyrealty.com

832-771-1314

 

 

How much money will you need to buy a home?

How much do I need to buy a home with Laura Hill at Local Katy Realty
At Local Katy Realty, we can help.

 

 

 

 

 

 

 

 

 

 

 

 

 

How much money will you need to buy a home?

That depends on a number of factors, including the cost of the house & the type of mortgage you get. Before you start shopping, it’s important to get an idea of how much a lender will actually be willing to give you to purchase your first home, but with the help of Local Katy Realty you will be guided to have all the requirements & answers before ever approaching a lender or bank & you will know what to do & how much money you will need to start & finish the process. In general, you need to come up with enough money to cover three costs:

  • earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house
  • down payment – a percentage of the cost of the home that you must pay when you go to settlement
  • closing costs – the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your earnest money goes into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That’s why many first-time home buyers turn to HUD’s FHA for help. FHA loans require only 3% down – and sometimes less.

Closing costs – which you will pay at settlement – average 3-4% of the price of your home. These costs cover various fees your lender charges & other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise.

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. http://www.localkatyrealty.com

832-771-1314

Are you a single mother? Do you know how to go about buying a home?

Are there ways a single mom can buy a home with Laura Hill at Local Katy Realty
Are there ways a single mom can buy a home?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Are you a single mother? Do you know how to go about buying a home?

At Local Katy Realty we will inform you “how to” & give you the best possible path to be a home owner. You won’t have the benefit of having two incomes, but there’s no reason why you can’t become a homeowner. You might want to buy a HUD home. A HUD home is when a government-insured loan (FHA) gets foreclosed & the Federal Housing & Urban Development pays the defaulted loan off, & then puts the home on the market.

Low-Down-Payment Loans

Also, the U.S. Department of Agriculture (USDA), U.S. Department of Housing & Urban Development (HUD) & the Federal Housing Administration (FHA) all have programs that help low-income homeowners to buy a home. Low-income loan programs such as the USDA Rural Development loan provide direct loans with zero percent down.

FHA loans require 3.5 % down; the FHA is more flexible with its qualification guidelines than lenders of conventional loans.

Credit Issues

For single mothers who have had credit issues, particularly resulting from a divorce, or who do not have a credit history of their own, government-backed loan programs make it possible to get exemptions from waiting periods associated with bankruptcy or foreclosure, & are more flexible on credit.

Preparation

Lenders want to see between 12 & 24 months of clean credit with no late payments, collections or judgments. Arrange to pay off any creditors & stick to your repayment agreements with them. Document your payments by using checks or money orders & keep copies of all agreements. Pay down your debt as much as possible. Lenders also want to see at least two-year’s worth of job history either with the same employer or within the same field.

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. http://www.localkatyrealty.com

832-771-1314

New home construction boost in Master Planned Katy area Communities may create a buyer’s market!

Cross Creek & Tamarron with Laura Hill at Local Katy Realty
Master Plan Communities Cross Creek & Tamarron
Falls at Green Meadows & Elyson with Laura Hill at Local Katy Realty
Falls at Green Meadows & Elyson
Cane Island & Young Ranch Communities with Laura Hill at Local Katy Realty
Cane Island & Young Ranch Communities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After approximately 2 years as a seller’s market, the Katy housing market has stabilized & is headed toward a buyer’s market due to new inventory & the downturn in the region’s oil & gas industry.

Lawrence Dean, Houston’s regional director for Metrostudy – a national company that tracks real estate trends – said while the home resale market remains stable, new construction in several master-planned communities is raising the inventory in the single-family home market. “Summer is definitely the key home buying season; it always has been,” Dean said. “And in Houston, ours tends to start a little later than other parts of the country. We’re just now getting into the optimal sales season.”

Several real estate professionals said people are moving to the Katy area for the strong school district & the accessibility the Grand Parkway provides to much of the Greater Houston area. Much of the growth in the western half of Katy can be tied to six new communities under construction or beginning construction soon: Falls at Green Meadows, Cane Island & Elyson in the northwest quadrant & Young Ranch, Tamarron & Cross Creek Ranch in the southwest quadrant.

Dan Naef, president of Rise Communities, which is developing Cane Island, said since property taxes are competitive across the board for most newly constructed developments, it is up to companies to compete with new & existing neighborhoods based on amenities. “The investment is important & they buy the community because they know that values hold better in master-planned communities,” he said. “The next thing is they buy in communities where the amenities are done, not promised.”

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. http://www.localkatyrealty.com

832-771-1314

 

Why you should buy a home instead of renting?

Rent vs. Buy at Local Katy Realtry
Should you Buy or Rent?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ok, so the pictures above are extreme opposite examples of each other, but I have to make a point & get your attention.

So with that said, other than the personal satisfaction, there can be several pros to purchasing a home. Of course every person has different circumstances that they have to consider. But some big advantages for buying a home would be:

  • Saving money in deducting the cost of your mortgage loan interest from your federal income taxes.
  • The interest you pay to each monthly mortgage payment will add up to big savings at the end of each year.
  • You can also deduct the property taxes.
  • If you rent, your monthly payment is gone forever and not invested into any future assets.
  • In renting, there’s no maintenance, it’s already added to your monthly rent.
  • In renting, you may lose your deposit if you personalize too much.

If you would like to hear about more information about your options, rights, short-term & long-term pros & cons in regard to renting vs. buying, or so much more information about buying a home or property, then you need to talk to Laura Hill, because…

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. http://www.localkatyrealty.com

832-771-1314

Lose Your Earnest Money!!! I don’t think so!!!

Learn how not to lose your earnest money at Local Katy Realty
Don’t lose your earnest money!

According to Beth Braverman, an award-winning journalist, writes for Realtor.com about this topic of Earnest Money.

What is the earnest money deposit? The cash you offer to essentially call dibs on a house. It is one of the most important & misunderstood parts of the home-buying process.

Depending on where you live, you can expect to put down anywhere from 1% to even 10% of the homes purchase price as earnest money. An earnest money deposit tells a seller you are serious about closing. Without earnest money, you could theoretically make offers on multiple homes, essentially taking them off the market until you decide which one you like best.

Don’t worry. The seller isn’t going to run off to Aruba with your cash. It remains in an escrow account or with the title company until the sale closes. And, if everything goes off without a hitch, that earnest money is put toward your down payment and closing costs. So there’s nothing to lose, right?

Probably not, except these three scenarios where your earnest money could end up financing the sellers trip to Aruba.

1. You waived your contingencies

In highly competitive markets, its becoming more common for buyers to waive contract contingencies regarding financing or an inspection. You might be tempted to do the same. It will make you a more attractive buyer. But it also comes with serious risks. You guessed it: You might lose your earnest money deposit.

The financing contingency guarantees that you’ll get your money back if for some reason your mortgage doesn’t go through and you’re unable to purchase the house. The inspection contingency allows you to renegotiate the price or demand repairs if serious defects are found during the inspection.

If your contract doesn’t have such buyer protections and you run into trouble with the inspection, you wont be able to get your money back if you abandon the deal. Most experts recommend that you not waive the inspection contingency, unless you’re planning on tearing the property down. We recommend to always have an inspection contingency written into the contract, so if the inspection reveals serious problems, then the buyer can back out without losing their earnest money.

As for the mortgage-financing contingency, waiving it may be the only way to compete with all-cash buyers. But you’ve got to be absolutely sure that you’ll be able to get approval from your bank.

I strongly encourage my clients to obtain a conditional approval before signing a non-contingent contract, says Ivona Perecman, a New York City real estate broker and lawyer. Otherwise, it may turn out that the bank that pre-approved you will not give you financing or offer a lot less worse terms and consequently, you may lose the deposit.

2. You ignored the timeline outlined in the contract

Your contract usually sets out a specific time frame in which you’ll need to secure financing, get the home inspected, and be available for the closing. Generally speaking, as long as you’ve made a good-faith effort to adhere to the timeline, sellers will grant a reasonable extension if a lender drags his feet or there are other extenuating circumstances that delay things.

However, in some cases sellers may include a time is of the essence clause in the contract. Watch out for this phrase in your paperwork. It means the closing date for the sale is binding. If you can’t make it close for any reason, you’ve breached the contract and could lose your deposit.

3. You get cold feet

If you have a change of heart about the home you’re buying, but there’s no problem with the property or the financing you likely will NOT get your money back.

If a buyer changes her mind and was able to request the down payment be returned without consequence then the whole idea of a contract would no longer be worth much, says Marc Kaufman, a real estate attorney with Wexler Lehrer & Kaufman in New York City. One party cannot simply walk away and default on a whim.

The earnest money deposit serves a protection for the sellers when they take their home off the market. If late in the game & you decide that you no longer want to make the purchase, they get to keep it as compensation for the time and money they have to spend on listing their home again and looking for another buyer.

When it comes to real estate, a case of buyers remorse could be even more painful than a lost deposit. To avoid both, really make sure the home you’re bidding on is “the one.”

When it comes to finding the right real estate agent, there is none better than a Realtor like Laura Hill at Local Katy Realty who cares & fights for her clients. http://www.localkatyrealty.com

832-771-1314

Behind on your payments? Will lenders help?

we can help - Local Katy Realty Laura Hill
Call us for help.

Loan Modification
Under pressure from the Obama Administration, lenders have added workers to work out lower payments for struggling borrowers. But customers still complain that banks won’t help unless a loan is seriously delinquent. The backlog of cases is so large that loan companies have little time to work on preventing defaults. Lenders find that one way to be certain the borrowers they’re helping are really tapped out is to focus on mortgages that are at least nine months delinquent, said Guy Cecala, chief executive officer of Inside Mortgage Finance.
To avoid this serious problem & get the necessary help & advice to resolve the issue, you need to contact Laura Hill at Laura Hill Realty for the solution.

https://www.localkatyrealty.com

832-771-1314

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