Photos for New Listings in Saratoga, Campbell, and Los Gatos will start next week.
Dear, First Time Home Buyer
So you’ve found a good paying job, moved out of your parent’s basement, living independently now, thinking about buying a home but WAIT… you want a new car too don’t you?
Yup we’ve all been in that situation, more so if your a guy, but hey girls like nice cars too.
You’re thinking, “I’ve got a good job, some money in savings, why shouldn’t I splurge a bit?”
The answer to that is a little thing called debt to income ratio. What is debt to income ratio? Basically a debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and… yes your NEW CAR PAYMENTS.
For example, say you earn $5000 a month and you have a car payment of $400. Using an interest rate of 8.0%, you would qualify for approximately $55,000 less than if you did not have the car payment. Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours.
Another thing you probably should not do when considering the thought of buying a home is moving your money around.
Back in the sub-prime lending days most lenders did not care if you had a job, income, or a brain. All you had to do was sign at the bottom saying that you did, how easy is that?
However after the housing bust lenders are very strict when it comes to lending on loans. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.
If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them. The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious
Because of the many legal and tax situations that can arise through the sale and purchase of real estate ALWAYS consult with your ATTORNEY and/or ACCOUNTANT before making ANY decisions in ANY transaction
* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *