$2,400. If you spend half of your monthly income to cover your debt, you’re going to have a very hard time convincing your lender for financing options.
assistance programs available for first-time homebuyers with little-to- no down payment required .
CREDIT SCORE Your credit history is one of the major factors that can determine whether you’ll be able to get funding options to buy a home. If you have a low credit score, the lender expects you to pay for higher interest rates, also known as an annual percentage rate (APR). This is the annual rate charged for borrowing through an investment. Add to that the hardship of getting your funding approved in the first place if you have below-average scores. A homebuyer is required to have a minimum FICO score of at least 580 to qualify for a low- down- payment advantage. That’s why it’s important to work on your credit score as early as possible to avoid delays, especially if you know that you’re going to be shopping for homes. Credit reports aren’t always 100 percent accurate, but any inconsistencies in your credit report will take time to get removed or resolved. Properly prepare to buy by taking time to do the math, do due diligence, and review your financial habits. Preparation and education will prevent a poor purchase decision whether it’s your home or your investment property. •
DOWN PAYMENT
This is largely dependent on how large of an initial cash out you can commit for the down payment. Also, the amount of your down payment affects your monthly
mortgage payment. An ideal measurement of down payment or initial cash out is usually 20 percent of the property sale price . For buyers who are unable to come up with 20 percent, lenders require them to pay private mortgage insurance (PMI). This works in the lender’s favor because it protects them in case the homebuyer or borrower defaults on the mortgage. PMI is a monthly payment that’s part of the overall mortgage payment to the lender. It can only be terminated once the loan balance reaches 78 percent of the original value of the home or when the equity reaches 22 percent . This also affects your interest rates. Using the same concept, a larger down payment would mean lower interest rates and lower DTI ratios. In reality, saving for a large down payment wouldn’t be ideal because there are government
$7,000 to housing costs. This rule isn’t as effective with today’s standards due to numerous ways to purchase a home. BACK-END RATIO This compares all your monthly debt payments to your monthly income. These debts include credit card payments, child support, car and student loans, or other outstanding loans. Lenders favor homebuyers with a back-end ratio not exceeding 36 percent. To compute your maximum allowable expenses for your debt:
(Gross income x 0.36) / 12
Michael Jordan is founder of Strategy Investment Group, a full-service turnkey property developer based in Metro Detroit, servicing clients fromacross the world. What started off as a single home
Let’s say you earn $80,000 per year:
($80,000 x 0.36) / 12 = $2,400
build has evolved to the collection and refinement of almost every type of investment property available on the market. Our website is strategyproperties. com. Contact us at (734) 224-5454 or email us at info@getuwe.com to learnmore.
The calculation above indicates that your maximum monthly debt expenses should not exceed
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