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Better to Buy Or Rent and What May Be Required
Buy or Rent? A place to live is one of the most common considerations one must make if home ownership is affordable. Over the long term a person is generally better off buying than renting. Some exceptions to this would be, moving within a few years, a very low rent, does not want the obligations that come with home ownership and has better use for his or her money in terms of a financial investment or lifestyle.If you can afford to buy and maintain a home there are many advantages. The advantages are the ability to benefit financially with the tax advantages of the interest and property tax deductions, the possibility of appreciation in future value and peace of mind that you can change the décor and stay until you decide to sell.Once you have made you decision to buy a home you must decide how much you can afford to pay for your new home mortgage. To do this you should analyze you other monthly expenses. Take some time with this, and even review you past years spending habits. Now its time to talk with the local mortgage broker to see what lenders will allow you to borrow. They will look at you current income and debt structure and come up with what the industry calls ratios. The front ratio is the housing ratio this just circulates the ratio between your gross monthly income and your new housing expense. The back end ratio calculates your total debt to income. Today most lenders require a 38 %Front Ratio 45 % max back ratio.Today lenders rely on stable monthly income for loan approvals. Generally the borrowers must have a two year work history with no gaps in employment. Income used must be verified through w-2, pay stubs and phone verification. Over time and or bonuses will be averaged over a two year history in order to be used. Prior to closing lenders will call employers to verify over the phone the borrower is still employed. Self employed borrowers must have a two year history in the same business and are required to provide two years of personal and business tax returns.
They also may be asked for third party verification, a CPA letter verifying they are self employed with a year to date profit and loss statement.Down payment or cash available to use is another factor you must consider when buying a home. When renting you are usually need the first months rent and the security deposit.Buying home requires a down payment the minimum amount need today is 3.5 %. This is under a FHA loan program. This means the lender will lend you up to 96.5 % of the purchase price, the balance you need in cash. There are other costs you must also consider. Closing costs, these are the costs associated with services needed to close the loan. Here is list: a property appraisal, lender fees,Tramon Williams Jersey, attorney fees, title fees, survey, inspection fees and recording fees. In some cases this can add up to 4 - 5 % of the loan amount. FHA loans will allow the seller to pay up to 3 % of the actual fees.Well that is some of what you may need to make a healthy financial decision. Happy home hunting!
Tom Altieri has over 26 years in the Real Estate mortgage industry. Visit Tom here for mortgage and real estate news and information.