Thinking of Buying a Home - How Much Home Can You Afford

If you are thinking of buying a home you really need to understand how much home that you can afford. Not how high a payment that you are comfortable with, but how high a payment that your lender and loan type/underwriter thinks that you can afford. And, you should find this out before you look for a new home. You don't want to waste your time, or your buying agents time, looking at homes that are out of your price range.

So how can you get an idea of how much home that you can afford? It's a two step process. The first step is determining what your ratios are. But, just what are these ratios, you might ask.

The first is called the Front End Ratio. That is merely how much your cost of housing will be compared to your gross income. Note: it is not how much your loan payment will be but the total cost of housing which includes Principle, Interest (both of which are our loan paymet), Taxes and Insurance. These are commonly referred to as PITI. Gross Income is your total monthly income from all sources: wages, alimony, interest, dividends, social security, etc. Your monthly income is figured by looking at your previous 12 months income and dividing by 12.

Front-End Ratio = (Monthly Housing Expense / Gross Monthly Income) x 100

The second is call the Back End Ratio, or your Debt-to-Income Ratio. This is the total of all your monthly debt payments, including PITI, compared to your gross monthly income. This includes all debts: credit cards, student loans, alimony, child support, gym memberships, etc.

Back-End Ratio = (Total Monthly Debt Expense / Gross Monthly Income) x 100

Lenders use these ratios to calculate risk, or the likelihood of the borrower being able to make their payment on time. The higher the ratio, the greater the risk.

As mentioned earlier, various loan types can and do have different ratio requirements. Below is a list of current ratios. Note: These figures have changed recently and are subject to change at any time under current credit conditions.

FHA & VA - 31 Front End /43 Back End Ratio
USDA Rural Development - 29 Front End / 41 Back End
Conventional - 33 Front End / 45 Back End

Using these figures, if you have a monthly income of $3000.00, under FHA and VA, your total monthly housing expense can be as high as $930.00 and your total debt to income can be as high as $1290.00 a month. For Rural Development, this would be a bit lower, for Conventional, a bit higher. Depending upon where you are looking, your PITI will vary based upon tax rate and insurance. In the Athens Area, for a median home sale of $170,000 taxes could run $160. month and insurance $40 month for a total of $200.00. This means you can afford a home with a loan amount of $730/month. (Note: Taxes and insurance will vary. Those figures are only approximate and will be dependant upon assessment and any exemptions you may be eligible for.)

Lenders usually place more emphasis on back end rations than front end.

The second step is to determine how much home your loan payment will cover. Use the chart below to determine your monthly principal and interest payments at various interest rates for either a 15- or 30-year term.

Interest Rate Factors Per $1000

Interest Rate	15 Yr. Term	30 Yr. Term	Interest Rate	15 Yr. Term	30 Yr. Term
4%	$7.40	$4.77	8%	$9.56	$7.34
4.25%	$7.52	$4.92	8.25%	$9.70	$7.51
4.5%	$7.65	$5.07	8.5%	$9.85	$7.69
4.75%	$7.78	$5.22	8.75%	$9.99	$7.87
5%	$7.91	$5.37	9%	$10.14	$8.05
5.25%	$8.04	$5.52	9.25%	$10.29	$8.23
5.5%	$8.17	$5.68	9.5%	$10.44	$8.41
5.75%	$8.30	$5.84	9.75%	$10.59	$8.59
6%	$8.44	$6.00	10%	$10.75	$8.77
6.25%	$8.57	$6.16	10.25%	$10.90	$8.96
6.5%	$8.71	$6.32	10.55%	$11.05	$9.15
6.75%	$8.85	$6.48	10.75%	$11.21	$9.33
7%	$8.99	$6.65	11.25%	$111.36	$9.52
7.25%	$9.13	$6.82	11.5%	$11.52	$9.71
7.5%	$9.27	$6.99	11.75%	$11.68	$9.90
7.75%	$9.41	$7.16	12%	$11.84	$10.09

1. Find the appropriate interest rate from the chart above.
2. Look across the column to the appropriate term to determine your interest rate factor.
3. Multiply the interest rate factor by your loan amount in $1,000s.
4. Compare that to the payment you reached by applying the ratios.

For instance, if you assume a 30 year loan at 5.5% for a $170,000 home, multiply $5.68 x 170 (the number of thousands in 170,000). Your payment would be $965.60, much higher than you can qualify for. To find out the approximate loan amount, divide $730 by $5.68. Your result will be a $128,500 loan at 5.5%. If you want to buy a home higher than that amount you will need to either make a larger down payment or qualify for a lower interest rate.

Note: This is not to be construed as financial advice. It is merely to provide you a means of approximating the price of a home you may be able to afford. Please check with an experienced lender to determine the exact amount of loan and interest rate you qualify for. They will then be able to give you a more exact price of a home you may be able to get a loan for.

For information on buying or selling real estate in Athens and the surrounding counties, call me at 706-207-5290 or click here to email me. If you would like to search for properties available in this same area, please click to follow the link to The Athens Real Estate Page.

So You want to Sell Your Home - Part 12 - The Grand Entrance

OK, you have had a garage sale, put excess clothes and furniture into storage and your yard looks like a well manicured golf course. You are now ready to invite buyers into your home. Another chance for a first impression, where those buyers will actually be spending most of their time if they purchase your home.

Whether you are using an agent or selling the home on your own, or using a limited service agent where you are doing all the showings, etc., make sure that buyer are directed to enter the home through the room that will give the most dramatic, the most favorable impression to them. If you are showing your home, that is relatively easy to manage, you direct the prospect to the right door. If you are using an agent, you will usually not be there when the home is shown. Make sure that any lock-box the agent provides is as close to the preferred entrance as possible and that they put specific directions which entrance to use. After all, they might never see how the chandelier looks framed in front of the french doors if they come in the wrong door.

Give a feeling of space. If you have a narrow entrance hallway, makes sure that it is open and cleared of all obstructions. While you might be used to opening the door slowly so that you don't damage that hall tree, anybody looking at your home will not be. Make sure that there are no loose throw rugs or mats that someone may trip over as they enter your home.

Say "Welcome!" with colorful flowers or candles strategically placed to draw the eye but are out of the way. But be careful of anything that might provide an overpowering scent. Remember, those prospective buyers might not have the same discriminatory tastes that you do. Or, they just might not like a home that reminds them of a flower shop.

Make it look like new. Or at least make it look well cared for. A thorough cleaning is always in order. Make sure the carpet is cleaned and just vacuumed, or the tile is swept and the grout cleaned. Eliminate any hand prints or smudge marks from walls, doors, etc. If any minor repairs are needed, such has nail holes patched, warn carpet or damaged tiles replaced, and that any painting is completed.
You can get hints and tips at how to decorate, not just your entrance, but your whole home, by looking at magazines, websites, or even by touring model homes and open houses. Find something that reminds you of your entrance way and do something similar.

Remember, this is the rare opportunity to make another good first impression. Make the best of it! It will help set the tone for how the rest of the home is viewed.

Home Financing - The USDA 100% Rural Development Loan

A few weeks ago I wrote an article about the types of financing available in today's market. Today, I would just like to expand on just one of those types, USDA Rural Development loans.

The U.S. Department of Agriculture is also in the home loan guarantee business, just like the V.A.
Under it's Rural Development 502 Guaranteed Housing Loan Program the USDA is offering 100% loans to qualified buyers. Here are the highlights of the loan program:

• There is no down payment required. Similar to the VA, this is a true 100% loan program.
  
• There is NO Mortgage Insurance. Conventional loans require PMI or Private Mortgage Insurance on loans of greater than 80%. This is usually added to the loan payment. FHA requires MIP, or Mortgage Insurance Premium, part of which is paid at closing and the remainder in the monthly payments.
  
• There is no Cash Reserve Requirement. Some loans and/or lenders require you to have cash reserves, money left over after closing, to cover up to six months of payments. The Rural Development 502 program does not have that requirement. While I am not a financial planner, it does make sense to me to have some cash reserves on hand after your purchase.
• There is no Pre-payment Penalty. You can pay your loan off early with no penalties. Although this is common in today's market, there are still some loans and lenders that will impose a pre-payment penalty.
• You Don't Have to Meet First Time Buyer Requirements. You aren't getting a tax credit, but, you can use this type of loan when moving from one home that you own to another.
• Both new construction and existing homes are eligible. You can by new are a previously ownded home.
• There is no Seller Contribution Limit to Closing Cost. Unlike an FHA loan, if your agent, or you, can negotiate it, the seller can pay all of your closing costs.
• There is no Gift Contribution Limit to Closing Costs. You may get all of your closing costs in the form of a gift from relatives or friends. You are not required to use your own "seasoned" funds.
• It is a Fully Amortized 30 Year Loan. Payments are fixed over the time of the loan. There are no adjustable interest rates or payments. There is no balloon payment.
• You Can Receive a loan for up to 102% of the Appraised Value. Providing you qualify, you can cover some of the closing costs and/or repairs with a loan of up to 102% of the appraised value.

This loan is not available in Athens-Clarke County or in Watkinsville. However, large areas of Oconee, Jackson, Madison and Oglethorpe counties are eligible for this loan program.

For more information on USDA loans contact a qualifed lender who is experienced with this program.

If you have questions on properties available under this program, or, if you are interested in buying or selling your home in Athens and the surrounding counties and communities please call me at 706-207-5290. Or, you can click here to email me with your inquiries. To search for home in Athens, Watkinsville, Oconee County, Oglethorpe County, Jackson County or Madison County, please visit my website at http://www.theathensrealestatepage.com

So You want to Sell Your Home - Part 11 - Too Much Stuff

How much stuff do you have? If you have been living in your home for any length of time, the answer is probably "too much stuff".

Stuff, no matter what it is: furniture, pictures, appliances, toys, knick-knacks, clothes, etc., only distracts the potential buyer who is previewing your home. The buyer(s) want to picture the home as theirs, not yours. They are trying to see themselves living there. They are placing their furniture in the rooms, their pictures on the walls, their children in the yard, etc. The more "stuff" you have, the harder it is for them to picture their "stuff".

You need to minimize your stuff, or, declutter! That doesn't mean getting rid of everything and living in a bare house. It does mean getting rid of what you don't need to live there.

Start with the small things. Look in your closets to see what is there. Depending upon where your home is you might have four seasons of clothing in your closet. Pack up those clothes that will not be needed in the next few months. If your closets are still overfull, pick out the shoes, shirts, coats, etc. that you will be using. Try spacing your hanging clothes at least 3 fingers apart. If you have shelves in your closet, make small stacks of clothing, and don't crowd them together. Give the feeling of more space rather than less.

Clear your counter tops. In the kitchen limit your counter top appliances to a coffee pot. Place all your other appliances out of the way. Reduce the amount of dishes, pots, pans, etc. in your cabinets. Make them appear roomy. In the bathroom, do the same thing. Reduce what you keep on the counters and clear out those things from the cabinets that your don't regularly use.

Remove most, if not all, of your collectible items from view. This may include display cabinets and curio shelves that you have put in place just to display what you have collected. It allows the buyers to picture there items.

Get rid of pictures. Free up your walls as much as possible. One or two strategically placed pictures in a room are fine, recommended even. But don't have picture walls, especially those picture walls loaded with your family history. Some even suggest getting rid of all pictures of a personal nature. And, if you have pictures, be careful of the content. Risque, religious, political, and other pictures might distract the buyers, and even cause some to reject the home outright. We have a couple of Louis Icart prints, tasteful, but they might be offensive to some. We took them down when we sold our homes since having them.

Do you have too much furniture? Many of us do, at least for certain rooms. Get rid of excess furniture. And what is excess furniture? Any furniture that makes a room look crowded is too much furniture. It also might be that your furniture is over-sized for a room. You might consider temporarily replacing it.

Garages, basements, storage areas: While you may be able to store some of you stuff in these areas, do not fill them up. Make sure that cars can be parked in the garage. Keep your "stuff" from the middle of any of these locations.

What can I do with that excess stuff? There are many options. You can get a storage unit and store your things there. If you are storing a lot of books, or other delicate items, a climate controlled storage unit might be appropriate. Just remember, though, that for items you might need, such as clothing when a season changes, to place boxes, trunks, etc. so that they are easily accessible.

You can give items away, to friends, family or donate them to charity. You can sell items on Ebay or have a yard/garage sale. There are many ways to get your stuff out of the way.

Remember, you are trying to sell your home, not your stuff. The less stuff buyers see, the more of your home that they see. Whether you are using an agent, or trying to sell your home on your own, when it comes to "stuff", less is more!

For more information on getting your home ready to sell, or for any other real estate concern, call me at 706-207-5290 or you can email me with your information request.

April Fool's Day Virus - Conflicker - Removal Tool

The news has been all over the latest April Fool's Day virus that is to hit tomorrow, or actually might have already hit in Sidney Australia and parts of Asia.There does not appear to have been any widespread damage yet.

But, I digress. From the Kim Komando show here is a link to see if your system has the conflicker virus and a removal tool for it.

Conflicker virus removal tool

Also, here is a link to other conflicker removal tools on Kim's site.

BTW, McAfee does not view this as a critical threat, especially if you have been updating your virus signatures on their site.

If you have Windows and have kept up with your updates, you should be ok. But, if not, go to Kim Komando's site and see what she has to say about fixing things.

Attention For Sale By Owner - Alert on Possible Scam

Do you have your home up for sale by owner? If so, please read this through.

A seller that I have been talking with, who has since listed their home, was approached by a couple about the home, while still FSBO (For Sale By Owner) last week. The couple was very nice, expressed an interest in the home and eventually made a verbal offer. The sellers countered and they reached an agreement.

The couple then said that they would be using a VA loan and would get a VA appraisal and have a signed contract. Three days later the sellers and the couple talked on the phone. The husband of the couple informed the seller that the VA would only value that house at about $7000 less than the agreed upon figure, and, that they would require the sellers to pay $5500 in closing costs.

When asked how the VA appraised the home without a singed contract, the buyer replied that the VA checked out the value on tax records. The sellers, fortunately, walked away from the deal.

Now, where is the scam? The VA, nor any lender that I know of, in today's market, will do an appraisal without a contract. And, they will certainly not base that appraisal all on tax records. And, while VA will allow seller concessions, up to a maximum, they do not require them.

It is apparent that the "buyers" wanted to get a much lower than market value price for the home as well as having the seller pay most, or all, of their costs to close. To compound that matter, one of the "buyers" represent their self as a real estate agent. If that were true, this practice appears to be a gross violation of Georgia license law.

This is the first instance of this that I have heard of, but it is one too many. I recommended that the seller talked to the broker where the "buyer" indicated she was an agent. If anyone comes to your door proclaiming to be an agent, make sure that you get a card of theirs, and, if they try anything like this, report it to their broker. The "buyer" might not be an agent, or, might be new and not realize that they are breaking license law. They also might be unscrupulous and want to get a quality home for foreclosure prices. Either way, the broker is responsible for the actions of the agents at their firm and, believe me, will nip this in the bud.

So, protect yourself from predatory buyers. Read my blog, I try to be fair. And, to find out about my offer especially for FSBO's, give me a call at 706-207-5290 or click here to email me with your inquiries.

From the VA Home Loan Information Site, see particularly steps 2 & 3,

FIVE EASY STEPS TO A VA LOAN:

1. Apply for a Certificate of Eligibility (COE).
   
   A veteran can obtain a COE by completing VA Form 26-1880, Request for a Certificate of Eligibility, and mailing it, along with proof of military service, to the eligibility center (see office list at back of pamphlet). Also, veterans who have already begun the loan application process with a lender may request the lender obtain a COE through webLGY, which is accessed through the VA portal. More information about this online system can be found at our website which is: www.homeloans.va.gov.
   
2. Decide on a home to buy and sign a purchase agreement.
   
3. Order an appraisal from VA. (Usually this is done by the lender.)
   
   Ordering an appraisal can be done via the Internet using TAS (The Appraisal System). This is a centralized system that allows lenders easy and quick access to order an appraisal.
   
4. Apply to a mortgage lender for the loan.
   
   While the appraisal is being done, the lender can be gathering credit and income information. If the lender is authorized by VA to process loans on the automatic basis (and approx. 99 percent of all VA loans are processed this way), the loan can be approved and closed upon receipt of the appraised value determination without waiting for a VA review of the credit application. VA has also approved the use of several automated underwriting systems for lenders to use in connection with VA loans. The two main systems are Loan Prospector and Desktop Underwriter. For loans that must be approved by VA, lenders send the credit package to VA. VA staff will then review it and notify the lender of the decision.
   
5. Close the loan and move in.

Buyers - There is Still Money Out There for a Loan - Financing Options

With all of the focus on how tight credit is, you may believe that there is no money out there for a home loan. If that is the case, you are believing wrong. There is still a lot of money available and a lot of lenders who will make that loan. There are even some 100% loans available.

Here is a list of the main types of loans that you can get today:

• FHA - the majority of today's mortgages are being written, or underwritten, by FHA. The requirements are a bit stiffer than they used to be, and the you will need to come up with at least 3.5% of the loan amount to qualify.
• FHA Renovation Loan - there are two types, standard and streamlined. They allow the buyer to renovate a home prior to moving into it. This type of loan can make purchasing distressed or foreclosed properties enticing.
• VA - this is a 100% loan available to honorably discharged U.S. veterans. It can be used more than once, the veteran will just have to get a certificate of eligibility each time he/she wants to use it. All previous VA loans have to be paid off.
• USDA- rural development loan for properties in specific designated zones. This is another 100% loan program. Athens-Clarke County is not eligible but much of Jackson, Madison, Oglethorpe, Oconee, Barrow and Walton County are eligible.
• Reverse Purchase Mortgage - this is a program specifically for seniors over age 62 who can purchase a home for a down payment and have no payments for the rest of their lives.
  
• Conventional - available from mortgage brokers, banks, lenders, etc. Different institutions will have different types of loan programs.
• Owner Financing - sometimes the seller will finance all or part of the purchase price. This may be good for someone with special circumstances who cannot qualify for a loan for some reason but is able to make the payments. A person who is self-employed but with less than 2 years of history might be a candidate for this.

For all loan types (except owner financing) speak with knowledge-able lenders. Not all lenders will be knowledge-able about each loan type. They might not even offer all loan types. And, even if they offer the same loan type, such as FHA Renovation, the programs may be very different. You may want to interview and deal with several lenders and make detailed comparisons before selecting one. And don't forget to get a pre-approval, not pre-qualified, letter. It puts you in a better position to get the home that you want.

For more information on loan types, or, about buying or selling a home or land in Athens and the surrounding counties, call me at 706-207-5290.