© Home Buyer’s Legal Info 2012
LEGAL INFORMATION FOR NEW HOME BUYERS
HOME BUYER’S LEGAL INFO

THE LATEST...

Average US rate on 30-year

mortgages falls to 3.86 percent

Home mortgage rates are at an all time low. It’s a great time to purchase a home. Average long-term U.S. mortgage rates declined this week following the Federal Reserve's decision to keep interest rates at record lows for now. Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.86 percent from 3.91 percent a week earlier. The rate on 15-year fixed-rate mortgages eased to 3.08 percent from 3.11 percent. Rates have stayed below 4 percent for nine straight weeks. Fed policymakers announced last Thursday they had decided to keep a key short-term interest rate close to zero in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. But Fed Chair Janet Yellen said a rate hike was still likely this year. A majority of Fed officials on the committee that sets the federal funds rate — which controls the interest which banks charge each other — still foresee higher rates before next year. The Fed will meet next in October and then December. A rate hike by the Fed could bring higher rates for home loans. The Fed has kept the federal funds rate near zero since the financial crisis struck seven years ago. To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. Mortgage rates could escalate at any time. Now is the time to get pre- approved for a loan. You can check current loan rates at zillow.com You can read more at: usnews.com

The Mortgage Checklist Every Home Buyer

Should Keep in Mind

How much mortgage do you qualify for?

Before purchasing a house, it is important that you know how much you can truly afford to spend on it. Knowing how far you can extend your means is, without a doubt, the most crucial factor when it comes to purchasing a new house. That is because it singlehandedly determines the extent of mortgage you can get, the locations you can look into, and the kind of houses you can consider. The maximum mortgage you can be given is generally determined by a ratio called debt-to-income by your lender. The ratio takes into account the level of debt you have with respect to your present income. Student loans, car payments, and credit card debts are just a few examples of what may be included under current debts. In case you have no prior experience in purchasing a house, your credit report will be run by your lender. Also, you may be asked about your tax filings and pay stubs. The point is to get an idea regarding how expensive a house you can afford. All the information collected from you enables your lender to limit your mortgage in advance to a healthy extent, and introduce you to only those houses which you can realistically afford.

What is front-end and back-end ratio?

Front-end ratio is defined as the percentage of your pretax salary covered by your mortgage. In case you apply for a mortgage loan backed by Freddie Mac or Fannie Mae,  your maximum front-end ratio will be 28%, and if you go for a FHA or USDA loan, the ratio will be 29%. Back-end ratio is slightly different from front-end ratio in the sense that it takes into account not just your mortgage-to-income ratio, but your total debt-to-income ratio. That means, the ratio takes into account any student loan, personal loan, car debt, credit card debt, or any other debt you may have, including your mortgage. If your goal is to obtain a conventional loan, your total debt should not cross 36% of your monthly gross income. The percentage is 41% for VA, USDA, and FHA loans.

What amount can you pay every month?

The front-end ratio and the back-end ratio serve the purpose of letting you know how much mortgage you can afford at maximum. That does not mean, however, that you must take up the maximum amount of loan you qualify for. Keep in mind that understanding how expensive a house you can afford is only a part of the whole process. You must take into account your final monthly payment, as well. Your final monthly payment gets impacted by a large number of factors, including interest rate, payment terms, chosen lender, and your location. It is also necessary to get a homeowner’s insurance when you buy a new house. So, you must take into account the expenses associated with the same. Usually, your homeowner’s insurance expense is included in your monthly payment. To save some cash every month, make sure that you shop around in order to find a good but affordable homeowner’s insurer. In order to rightly determine where you stand, you may want to prepare a thorough budget, noting down your credit card payments, grocery costs, utility bills, car insurance, and other expenses. Note that purchasing a house requires you to pay for natural gas, water, sewage and such other things, too. So, make sure that you take them into account. Your mortgage payments will stay with you for many decades to come, so be sure to choose your lender wisely. Do not be one of those people who compare hundreds of houses but do not bother to compare lenders.
Mortgage Contract, House, Male Icon, Question Mark
© Home Buyer’s Legal Info 2012
HOME BUYER’S LEGAL INFO

THE LATEST...

Average US rate on 30-year

mortgages falls to 3.86 percent

Home mortgage rates are at an all time low. It’s a great time to purchase a home. Average long-term U.S. mortgage rates declined this week following the Federal Reserve's decision to keep interest rates at record lows for now. Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.86 percent from 3.91 percent a week earlier. The rate on 15-year fixed-rate mortgages eased to 3.08 percent from 3.11 percent. Rates have stayed below 4 percent for nine straight weeks. Fed policymakers announced last Thursday they had decided to keep a key short-term interest rate close to zero in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. But Fed Chair Janet Yellen said a rate hike was still likely this year. A majority of Fed officials on the committee that sets the federal funds rate — which controls the interest which banks charge each other — still foresee higher rates before next year. The Fed will meet next in October and then December. A rate hike by the Fed could bring higher rates for home loans. The Fed has kept the federal funds rate near zero since the financial crisis struck seven years ago. To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. Mortgage rates could escalate at any time. Now is the time to get pre-approved for a loan. You can check current loan rates at zillow.com You can read more at: usnews.com

The Mortgage Checklist Every Home

Buyer Should Keep in Mind

How much mortgage do you qualify

for?

Before purchasing a house, it is important that you know how much you can truly afford to spend on it. Knowing how far you can extend your means is, without a doubt, the most crucial factor when it comes to purchasing a new house. That is because it singlehandedly determines the extent of mortgage you can get, the locations you can look into, and the kind of houses you can consider. The maximum mortgage you can be given is generally determined by a ratio called debt-to-income by your lender. The ratio takes into account the level of debt you have with respect to your present income. Student loans, car payments, and credit card debts are just a few examples of what may be included under current debts. In case you have no prior experience in purchasing a house, your credit report will be run by your lender. Also, you may be asked about your tax filings and pay stubs. The point is to get an idea regarding how expensive a house you can afford. All the information collected from you enables your lender to limit your mortgage in advance to a healthy extent, and introduce you to only those houses which you can realistically afford.

What is front-end and back-end ratio?

Front-end ratio is defined as the percentage of your pretax salary covered by your mortgage. In case you apply for a mortgage loan backed by Freddie Mac or Fannie Mae, your maximum front-end ratio will be 28%, and if you go for a FHA or USDA loan, the ratio will be 29%. Back-end ratio is slightly different from front-end ratio in the sense that it takes into account not just your mortgage-to-income ratio, but your total debt-to-income ratio. That means, the ratio takes into account any student loan, personal loan, car debt, credit card debt, or any other debt you may have, including your mortgage. If your goal is to obtain a conventional loan, your total debt should not cross 36% of your monthly gross income. The percentage is 41% for VA, USDA, and FHA loans.

What amount can you pay every

month?

The front-end ratio and the back-end ratio serve the purpose of letting you know how much mortgage you can afford at maximum. That does not mean, however, that you must take up the maximum amount of loan you qualify for. Keep in mind that understanding how expensive a house you can afford is only a part of the whole process. You must take into account your final monthly payment, as well. Your final monthly payment gets impacted by a large number of factors, including interest rate, payment terms, chosen lender, and your location. It is also necessary to get a homeowner’s insurance when you buy a new house. So, you must take into account the expenses associated with the same. Usually, your homeowner’s insurance expense is included in your monthly payment. To save some cash every month, make sure that you shop around in order to find a good but affordable homeowner’s insurer. In order to rightly determine where you stand, you may want to prepare a thorough budget, noting down your credit card payments, grocery costs, utility bills, car insurance, and other expenses. Note that purchasing a house requires you to pay for natural gas, water, sewage and such other things, too. So, make sure that you take them into account. Your mortgage payments will stay with you for many decades to come, so be sure to choose your lender wisely. Do not be one of those people who compare hundreds of houses but do not bother to compare lenders.