Straight Talk About Real Estate

When should you start actually looking at houses? Not yet.

When you are prequalified with a lender, they would have told you the price of home you can afford, and what your monthly payment will be. Are you comfortable with that monthly payment? For some, what they can qualify for is higher than what their budget allows. For a full documentation loan with good credit, a lender will qualify you with a debt ratio of 48%. That means all your monthly debts payments combined - house payment, property taxes, homeowner’s insurance, plus any other monthly obligations that you have such as car payment, credit card payments, etc - do not exceed 49% of your monthly gross income. This doesn’t take into consideration what you might need to spend on other essentials, such as car insurance and food! Some lenders will even qualify you with a debt ratio of over 48%. I’ve seen buyers qualify for loans with a 60% debt raio because of their good credit.

The price of home you should look for is the one with the payment you qualify for or the one with the payment you feel comfortable with, which ever is LESS. I may qualify for a loan amount of $600,000 with a monthly payment of $4000, but I may only feel my budget allows a monthly payment of $3000. So the loan amount I should get is $450,000.

Now that you know what loan amount you can get, add on top of that the amount of cash investment, or down payment, and you will arrive at the price of home you should be shopping for.

Once you have the price, you need to look for a house. Where do you start? What should you consider in deciding on a location? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home