Posted by admin on Feb 24, 2010 in Naples Homes Blog | 2 comments
The Business Cycle and Buying a Home
When the supply of available homes is greater than the supply of buyers, appreciation may slow and prices may even fall, as happened in the early eighties, the early to mid-nineties and currently. This the classic buyer’s market.
If you are lucky enough to purchase a home during a slow housing market, you can be reasonably certain the economy will begin to show strength again soon and home prices will eventually rise.
Unemployment and the ability to obtain financing have great effects on the housing market. People without jobs can’t buy homes. When the jobs market grows so will the housing market. More people who were renters will have adequate employment to qualify for loans and be able to purchase a home. Supplies will shrink as the increasing demand by home buyers rises.
Supply and demand is a constant force that makes the housing market unpredictable at times. It is only when we look back in time that we can see the ultimate highs and lows the market reaches during the business cycle. So far, nobody has been able to accurately predict the future. This holds true for the real estate market as well.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 0 comments
The Business Cycle and The Housing Market
There are times when the economy is brisk and everyone feels confident about his or her prospects for the future. As a result, they spend money. People eat out more, buy new cars, and….…they buy new homes.
Then, for one reason or another, the economy slows down. Companies lay off employees and consumers are more careful about where they spend money, perhaps saving more than usual. As a result, the economy decelerates even further. If it slows enough, we have a recession.
During such a time, fewer people are buying homes and the housing market is in a state of decline. Even so, some homeowners find themselves in a situation where they must sell. Families grow beyond the capacity of the home, employees get relocated, and some may even find themselves unable to make their mortgage payment.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 0 comments
If you’re in the market to buy a home, buying anything as expensive as a car is a no, no. Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours.
Can I Buy A New Car If My Mortgage Has Already Been Approved?
Let’s say you have a contract to purchase your new home and already been fully approved for financing. Your down payment is made and now you’re just waiting for the closing date. You decide to go out and buy a new SUV to assist with the move and take up space in your new 3-car garage when you move in.
What most buyers don’t realize is that if the lender will see the new car purchase when he checks your credit report right before closing. When the lender sees that on your credit report he can deny your purchase at the last moment – it’s happened many times. Now you have a car, no home and you could be out the deposit depending on your contract terms.
The moral of the story is, “don’t buy a car when you are in the market for a home until long after you have closed and moved in.”
Buying a home is a much more important purchase than a car when considering your future financial well being.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 0 comments
When determining your ability to qualify for a mortgage, a lender looks at what is called your “debt-to-income” ratio. A debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and…car payments.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 1 comment
When an individual’s income starts growing and they manage to set aside some savings, they commonly experience what may be considered an innate instinct of modern civilized mankind.
The desire to spend money.
Since North Americans have a special love affair with the automobile, this becomes a high priority item on the shopping list. Later, other things will be added and one of those will probably be a house.
However, by the time home ownership has become more than a distant and hopeful dream, you may have already bought the car.
It happens all the time, sometimes just before you contact a lender to get pre-qualified for a mortgage.
As part of the interview, you may tell the loan officer your price target. He will ask about your income, your savings and your debts, then give you his opinion. “If only you didn’t have this car payment,” he might begin, “you would certainly qualify for a home loan to buy that house.”
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 4 comments
Important Things To Avoid Before Buying a Home
For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.
How Changing Jobs Affects Buying a Home
If you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time, switching employers should not create a problem. Just make sure to remain in the same line of work. Hopefully, you will be earning a higher salary, which will help you better qualify for a mortgage.
If your income is based on hourly wages and you work a straight forty hours a week without over-time, changing jobs should not create any problems.
If a substantial portion of your income is derived from commissions, you should not change jobs before buying a home. This has to do with how mortgage lenders calculate your income. They average your commissions over the last two years.
Changing employers creates an uncertainty about your future earnings from commissions. There is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings.
Changing jobs would negatively impact your ability to buy a home.
If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. Then they will average your bonuses over the last two years in calculating your income.
Changing employers means that you do not have the two-year track record necessary to count bonuses as income.
If you earn an hourly income but rarely work forty hours a week, you should not change jobs. There would be no way to tell how many hours you will work each week on the new job, so no way to accurately calculate your income. If you remain on the old job, the lender can just average your earnings.
Since all employers award overtime hours differently, your overtime income cannot be determined if you change jobs. If you stay on your present job, your lender will give you credit for overtime income. They will determine your overtime earnings over the last two years, then calculate a monthly average.
If you are considering a change to self-employment before buying a new home, don’t do it. Buy the home first.
Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.
If you are considering changing your business from a sole proprietorship to a partnership or corporation, you should also delay that until you purchase your new home.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 0 comments
Important Things To Avoid Before Buying a Home
When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.
If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.
The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.
Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it “easier,” could make it more difficult for the lender to properly document.
So leave your money where it is until you talk to a loan officer.
Oh…don’t change banks, either.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 0 comments
Benefits of Owning Your Own Home
Both indoors and outdoors, you will probably have more space if you own your own home. Even moving to a condominium from an apartment, you are likely to find you have much more room available – your own laundry and storage area, and bigger rooms. Apartment complexes are more interested in creating the maximum number of income-producing units than they are in creating space for each of the tenants.
If you are moving to a home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more “stuff.”
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 3 comments
When you rent as opposed to owning a home, you are normally limited on what you can do to improve your home. You have to get permission to make certain types of improvements. Nor does it make sense to spend thousand of dollars painting, putting in carpet, tile or window coverings when the main person who benefits is the landlord and not you.
Since your landlord wants to keep his expenses to a minimum, he or she will probably not be spending much to improve the place, either.
When you own a home, however, you can do pretty much whatever you want. You get the benefits of any improvements you make, plus you get to live in an environment you have created, not some faceless landlord.
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Posted by admin on Feb 24, 2010 in Naples Homes Blog | 0 comments
Some people are just lousy at saving money, and a house is an automatic savings account. By owning your home, you essentially accumulate savings in two ways. Every month, a portion of your payment goes toward the principal. Admittedly, in the early years of the mortgage, this is not much. Over time, however, it accelerates.
Second, your home appreciates. Average appreciation on a home is approximately five percent, though it will vary from year to year, and in some years may even depreciate.. Over time, history has shown that owning a home is one of the very best financial investments.
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