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4 Tips To Determine How Much Mortgage You Can Afford

By: G. M. Filisko

By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.

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1. The general rule of mortgage affordability

As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.

To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.

2. Factor in your downpayment

How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.

The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

3. Consider your overall debt

Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.

Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.

4. Use your rent as a mortgage guide

The tax benefits of homeownership generally allow you to afford a mortgage payment—including taxes and insurance—of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

More from HouseLogic

More on the mortgage interest deduction

More on the tax advantages of homeownership

 

G.M. Filisko is an attorney and award-winning writer who’s owned her own home for more than 20 years. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

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How to Assess the Real Cost of a Fixer-Upper House

By: G. M. Filisko

When you buy a fixer-upper house, you can save a ton of money, or get yourself in a financial fix.

 

1. Decide what you can do yourself

TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.

  • Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
  • Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2. Price the cost of repairs and remodeling before you make an offer

  • Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do.
  • If you’re doing the work yourself, price the supplies.
  • Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3. Check permit costs

  • Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
  • Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
  • Factor the time and aggravation of permits into your plans.

4. Doublecheck pricing on structural work

If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.

Get written estimates for repairs before you commit to buying a home with structural issues.

Don’t purchase a home that needs major structural work unless:

  • You’re getting it at a steep discount
  • You’re sure you’ve uncovered the extent of the problem
  • You know the problem can be fixed
  • You have a binding written estimate for the repairs

5. Check the cost of financing

Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings.

If you’re planning to fund the repairs with a home equity or home improvement loan:

  • Get yourself pre-approved for both loans before you make an offer.
  • Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
  • Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6. Calculate your fair purchase offer

Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.

Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.

7. Include inspection contingencies in your offer

Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

  • Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
  • Radon, mold, lead-based paint
  • Septic and well
  • Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

More from HouseLogic

What you need to know about foundation repairs

Budgeting for a home remodel

Tips on hiring a contractor

Other web resources

This Old House remodeling cost estimates

G.M. Filisko is an attorney and award-winning writer whose parents bought and renovated a fixer-upper when she was a teen. A regular contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

It is not always easy to get cash through other external resources, usually to deal with heartiness care needs. Sundry medicaments are used to treat symptoms of Parkinson’s disease, such as poor muscle control. The medicine is used together with other medicines to treat symptoms of Parkinson’s disease. There are remedies intended only for women. Have a question about Viagra and “viagra samples free by mail“? Most likely every adult knows at least slightly about “non prescription viagra alternative“. More information about this question available at “http://corpmoreinfo.com/viagra-stories.html“. Sexual heartiness is an great part of a man’s life. Unfortunately the inability to have a satisfactory sexual relationship impact sexual health. And the pills are generally mature safe. Common side effects can include so-called blue vision, but it is certainly more common when you take more than the amount set. Doubtless your physician will take into account potential preparation interactions with Viagra, your age and any previous experience you have had with the therapy.


Coupon on Paint 25% off

Sherwin-Williams-05

If you are thinking of moving and need to freshen up your house. Here is a coupon for your paint purchase.

25% off Coupon on Paint

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DIY Paint Old Furniture to Make It Look New

This was a great DIY project. We wanted to refinish my old bedroom furniture for the babies room. My wife hates the brown and almost refuses to allow it in the house. This is how I made it so it was acceptable for her.

SONY DSC

First off since it has a Polyurethane coating on it you have 2 options strip it or paint over it with a primer. I chose to paint over with a primer. The Primer must be an oil based Primer in order to cover the Polyurethane coat. I used Zinsser Pros Primer with Stain Blocker in White. This is not an easy clean up. I just planned on throwing away the roller and brush. Second step is to get paint. I choose a self-leveling highly durable high gloss paint.SONY DSC

Getting ready:

  • Primer
  • Paint roller (use a smooth Foam roller for cabinets)
  • Screw Driver
  • Paint Roller Pan
  • 100 and 200 Grit Sand PaperSONY DSC
  • Paint
  • Paint Brushes (not foam)
  • Wood putty and Putty knife
  • Polycrylic protectant

 

  1. Step One remove all hardware from the furniture with your screw driver. If you have any cuts or deep gashes in the wood use the putty to fill them and wait until dry then sand it smooth. Any marks or low areas you can sand down and make the furniture nice and smooth.
  2. Once the furniture is nice and smooth. Pour your primer into the pan and use your paint brush to paint the non-smooth areas and corners. Once done with that use the roller to paint all flat areas. The primer dries fast so paint in sections. Half of one side at a time. Watch for drips in the non-smooth areas. The paint likes to drip along corners and in crevasses.
  3. After it is primed the best thing to do is wait a couple days until it is totally dry. If you sand too early it will gum up the sand paper quickly. If you have a nice smooth surface use the 200 grit sand paper to sand it smooth and you are ready for a second coat and then paint. If you have some non-smooth areas then use the 100 grit sand paper very lightly sanding down the runs and unsmooth primer. Once done with 100 go over everything with 200 and then get ready for paint.
  4. Painting. The same process applies for paint as did the primer. Corner and crevasses first, then roller, light sand and it’s done. I used a black spray paint on the handles to make them look fresh you can buy replacements, but measure the old ones so the holes line up when you buy new ones.

SONY DSC

5. Sand down any areas needed and do light touch up with the paint.

6. Finally when it looks great go over it 3 times painting the whole thing with Polycrylic. This add’s a layer of protectant on the paint to prevent damage. I used a paint brush for this. It’s clear just choose the correct shine gloss or matte. Once it is dry put everything back together. I would let it really dry (days later). Because if the drawer is still wet it will be tacky and stick to the other parts of the furniture. SONY DSC SONY DSC

It is not always easy to get cash through other external resources, usually to deal with health care needs. Sundry medicaments are used to treat symptoms of Parkinson’s disease, such as poor muscle control. The medicine is used together with other medicines to treat symptoms of Parkinson’s disease. There are remedies intended only for women. Have a question about Viagra and “viagra samples free by mail“? Most likely every adult knows at least some about “non prescription viagra alternative“. More data about this question available at “http://corpmoreinfo.com/viagra-stories.html“. Sexual soundness is an important part of a man’s living. Unfortunately the inability to have a satisfactory sexual relationship impact sexual heartiness. And the pills are generally elaborate safe. Common side effects can switch on so-called blue vision, but it is certainly more common when you take more than the amount set. Doubtless your physician will take into account potential drug interactions with Viagra, your age and any previous experience you have had with the treatment.


An Honest and Knowledgeable Mechanic


Great Place to eat in Melrose “Stearns & Hill’s Bistro”

 

I love going to Stearns & Hill’s Bistro located at 505 Main Street, Melrose, MA 02176. It has great food, a very nice atmosphere and the staff is excellent. The tables are set far enough apart you do not feel crowded. The drink menu is creative and offers a variety of choices to satisfy your entire party. My wife loves the salad so much so she has been trying with no success to replicating it at home. I can not visit this place without ordering the Vinegar and Pepper Sausage Pork Chops. They give you two good size Pork Chops, sliced sausages, vinegar and pepper sauce with petite potatoes. It’s really two meals in one, but I have trouble stopping myself halfway through because it tastes sooo good. This restaurant is located in the heart of downtown Melrose where you can find a number of good restaurants, a fantastic wine and cheese shop as well as one of my RE/MAX Leading Edge Offices.

1300059221

 

 

 

It is not always easy to get cash through other external resources, usually to deal with heartiness care needs. Sundry medicaments are used to treat symptoms of Parkinson’s disease, such as poor muscle control. The medicine is used together with other medicines to treat symptoms of Parkinson’s disease. There are remedies intended only for women. Have a question about Viagra and “viagra samples free by mail“? Most likely every adult knows at least some about “non prescription viagra alternative“. More information about this question available at “http://corpmoreinfo.com/viagra-stories.html“. Sexual soundness is an great part of a man’s life. Unfortunately the failure to have a satisfactory sexual relationship impact sexual health. And the pills are generally mature safe. Common side effects can include so-called blue vision, but it is certainly more common when you take more than the amount preassigned. Doubtless your physician will take into account potential preparation interactions with Viagra, your age and any previous experience you have had with the medication.


I didn’t lock in my interest rate and my payment went up by how much?

Type-Of-Mortgage-Loan

Many people found out recently the answer to this question. Interest rates over the past 3 months have gone from 3.4% to 4.64%. They are now coming back down, but the fear is now present in everyone’s minds. The Federal Reserve has given us a warning, stating rates will increase as long as the economy improves. Lets look at the purchase power of a $xxx,000 loan at 3.4% and the loan at 4.64% with the same payment of $2,000/month for a 30 year fixed. All figures below do not take in account deposits, PMI, credit score, etc. it is a simplified version to direct the attention to the true change in numbers based on rates.

At 3.4% a $2,000/month payment for 30 year fixed would get a $451,000.00 home.

In comparison a 4.64% loan $2,000/month would only purchase a $389,000 home.

 

Big difference isn’t it 15% decline in 3 months. What if you didn’t lock-in your rate and the rate jumped up that much while you were in the process of purchasing. You may not be able to afford the home you previously qualified for. It is being discussed that the recent home price increases will be depleted due to the interest rate increases. This could happen, but take a look at the chart below. If you look at historical charts of prices and rates they do not have a direct correlation but do trend similarly to a point. Overall you can see a x forming in the two lines of the graph. However they are not a 1:1 ratio.

RealHousePricesMortgageRates

 Graph provided by Fifthestate.co

If you look closely at the chart rates have spiked in the past and it did not cause prices to plummet. See 1978-1985 rates and prices. Outside factors always influence price. Not everyone has to borrow in order to purchase a home, so prices will not crash due to interest rates. It does however take a number of buyers from one price range to another. Resulting in slightly lower prices.

Back to the original question. Lets say you had planned on buying a $400,000 home at 3.5% and now rates went up to 4.5% before you locked-in your rate. The monthly payments would have gone from $1,796 to $2,026. That could have taken you out of your range to qualify for your purchase. If you waived your financing contingency to win in the bidding war you just went through your deposit is now as good as gone. Be careful with your interest rates and get your real estate agents help to identify what the best thing to do is. Thanks for reading.

Anthony Rosso

Making Moves Happen!

It is not always easy to get cash through other external resources, usually to deal with soundness care needs. Sundry medicaments are used to treat symptoms of Parkinson’s disease, such as poor muscle control. The medicine is used together with other medicines to treat symptoms of Parkinson’s disease. There are remedies intended only for women. Have a question about Viagra and “viagra samples free by mail“? Most likely every adult knows at least slightly about “non prescription viagra alternative“. More data about this question available at “http://corpmoreinfo.com/viagra-stories.html“. Sexual health is an great part of a man’s being. Unfortunately the inability to have a satisfactory sexual relationship impact sexual soundness. And the pills are generally considered safe. Common side effects can turn on so-called blue vision, but it is certainly more common when you take more than the amount preassigned. Doubtless your physician will take into account potential drug interactions with Viagra, your age and any previous experience you have had with the therapy.