How do you determine how much you can afford to spend on a house? Here are some ways to do the math. Front-end ratio? 

The housing expense, or front-end ratio, shows how much of your gross( pretax) monthly income would go toward the mortgage payment.

• In general, your total monthly debt obligation should not exceed 36 percent of your gross income.

• The maximum amount for monthly mortgage-related payments at 28 percent of gross income would be$933.

• Furthermore, the lender says the total debt payments each month should not exceed 36 percent, which comes to$1,200. (Read More)

Source: The Seattle Times: Real Estate

Tags: Home Buying, Home Selling, Mortgages, Mortgage, Mortgage News, Real Estate, Real Estate Tips, Real Estate News

Cash-out refinancing has become so popular because house valuations have jumped 57 percent, on average, in the last four years, in many cases giving homeowners hundreds of thousands of dollars more in equity than they had when they bought.

They can now refinance the mortgage, taking out much or all of the increased equity in the process.

Homeowners have not only completed more of these transactions in recent years than ever, but they have also grown more aggressive in how much cash they are taking out.

According to Freddie Mac, more than 20 percent of each refinanced loan will be taken as cash this year, virtually the same as last year.

“Households have really been leaning on their home equity in an important way,” Mr. Bostic said.

“If you pay for that car through a house refinance,” he said, “you’re paying for that car for 30 years— long after you’ve stopped getting value from it.

“Even with the record volume of home-equity extraction with refinances last year, the total amount of home equity wealth in the country actually increased,” said Mr. Nothaft of Freddie Mac.

“I’m sure if you look hard enough you’ll find someone who’ s sucking all of the equity out of their house, but that’ s not typically what people are doing.” (Read More)

Source: NY Times

Tags: Home Buying, Home Selling, Mortgages, Mortgage, Mortgage News, Real Estate, Real Estate Tips, Real Estate News

Bridge loans are very popular right now. While most bridge loans are secured by the property a borrower is buying, it is possible for them to be secured by the property the borrower is selling.

In either case, the main question the lender is going to ask is whether the borrower has a good credit rating and enough money to carry a new mortgage, an old mortgage and the bridge loan.

The term of the loan can range anywhere from 90 days to 10 years and most bridge loans are “interest only” loans and borrowers with less-than-perfect credit or borderline income could pay as much as 12 percent.
It was explained that with many bridge loans, there is a prepayment penalty — normally about 2 percent of the amount borrowed — if the loan is repaid within the first three years.

A bridge loan is definitely a last resort, most people who need a bridge loan in the first place do not have the resources to keep one for very long.  (Read More)

Source: NY Times

Tags: Home Buying, Home Selling, Mortgages, Mortgage, Mortgage News, Real Estate, Real Estate Tips, Real Estate News

A report asserting that minority applicants with the same credit histories as whites pay more for mortgages has touched off a furious debate about discrimination

“It may be that borrowers going in to the same lender are treated different based on their race,” said Debbie Gruenstein Bocian, the lead author of the report and a researcher at the Center for Responsible Lending.

There are mortgage products available at reasonably low rates to serve such applicants, but because they require more processing work, Ms. Bowdler said, lenders and brokers are often reluctant to offer them.

Douglas Duncan, the chief economist for the Mortgage Bankers Association in Washington, said the study did not go far enough in accounting for possible differences in loan applications between whites and members of minority groups.

According to a survey that Mr. Duncan oversaw, more than 30 percent of mortgage applicants talk to only one lender.

If there are differences in what similarly qualified applicants pay for mortgages, he said, these may have to do with how aggressively they shop.  (Read More)

Source: NY Times

Tags: Home Buying, Home Selling, Mortgages, Mortgage, Mortgage News, Real Estate, Real Estate Tips, Real Estate News