How Much Mortgage Can You Afford?

Finance      

Sep 5, 2013 

By: Realtor.com Team

Prev      Next

 

http://www.freewebs.com/edgar-realtor/ 

 

Call Edgar W Rojas at: (954)549-0681

 

59

Before you apply for a home loan, evaluate your personal finances. How much you earn versus how much you owe will likely determine how much a lender will let you borrow. Read on to learn how to do the math. (You can also use our Home Affordability Calculator to determine how much house you can afford.)

 

Add Up Your Income
First, determine your gross monthly income. This includes any regular and recurring income that you can document. If you can’t document the income, or if it doesn’t show up on your tax return, then you can’t list it to qualify for a loan. However, you can use unearned sources of income such as alimony or lottery payoffs. And if you own income-producing assets such as real estate or stocks, the income from those can be estimated and used in this calculation. If you have questions about your specific situation, any good loan officer can review the rules.

 

Add Up Your Debt
Next, calculate your monthly debt load. This includes all monthly obligations like credit cards, installment loans, car loans, personal debts or any other monthly payment like alimony or child support. For revolving debt like a credit card, use the minimum monthly payment for this calculation. For installment debt, use the current monthly payment. And you don’t have to consider a debt at all if it is scheduled to be paid off in less than six months. Add everything up to get a figure we’ll call your monthly debt service.

 

How Lenders Calculate What You Can Pay
Most lenders don’t want you to take out a home loan that will overload your ability to repay everyone you owe. Although every lender has slightly different formulas, here is a rough idea of how they look at the numbers.

Typically, your monthly housing expense, including monthly payments for taxes and insurance, should not exceed 28 percent of your gross monthly income. If you don’t know what your tax and insurance expense will be, estimate about 15 percent of your payment. The remainder can be used for principal and interest repayment.

In addition, your proposed monthly housing expense and your total monthly debt service combined cannot exceed 36 percent of your gross monthly income. If it does, your application may exceed the lender’s underwriting guidelines, and your loan may not be approved.

Depending on your individual situation, there may be more or less flexibility in the 28 percent and 36 percent guidelines. For example, if you can make a large down payment and thus borrow less than 80 percent of the home’s value, the qualifying ratios become less critical. Likewise, if a rich uncle is willing to co-sign the loan, lenders will be much less focused on the guidelines discussed here.

 

Explore Your Loan Options
Remember that there are hundreds of loan programs available in today’s lending market, and each has different guidelines. So, don’t be discouraged if your dream home seems out of reach.

Also keep in mind that you control a number of factors that affect your monthly payment. For example, you might choose to apply for an adjustable-rate loan, which has a lower initial payment than a fixed-rate program. Or you can make a larger down payment, which will lower your projected monthly payment.

 

 

John Adams wrote this article.

Fresh out of the print

Florida’s housing market on upswing in March

Related:NAR: March existing-home sales slip from February due to tight inventory.

 

ORLANDO, Fla. – April 22, 2013 – In March, Florida’s housing market reported increased closed sales, more pending sales, higher median prices and a reduced inventory of homes for sale, according to the latest housing data released by Florida Realtors®.

“Florida’s housing market continues to demonstrate its recovery – March marks the 15th consecutive month that the statewide median sales prices for both single-family homes and for townhouse-condo properties rose year-over-year, according to Florida Realtors’ data,” said 2013 Florida Realtors President Dean Asher, broker-owner with Don Asher & Associates Inc. in Orlando. “The median price is up more than 15 percent for both single-family homes and for townhouse-condos.

“Meanwhile, buyer demand is increasing, but supply continues to be constrained in many areas. In March, the median days on market (the midpoint of the number of days it took for a property to sell that month) was 57 days for single-family homes and 61 days for townhouses and condos. That means 50 percent of homes on the market in Florida sell in two months or less.”

Statewide closed sales of existing single-family homes totaled 19,631 in March, up 9 percent compared to the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department in partnership with local Realtor boards/associations. Closed sales typically occur 30 to 90 days after sales contracts are written.

Meanwhile, pending sales – contracts that are signed but not yet completed or closed – for existing single-family homes last month rose 23.4 percent over the previous March. The statewide median sales price for single-family existing homes last month was $160,000, up 15.2 percent from the previous year.

According to the National Association of Realtors® (NAR), the national median sales price for existing single-family homes in February 2013 was $173,800, up 11.3 percent from the previous year. In California, the statewide median sales price for single-family existing homes in February was $333,880; in Massachusetts, it was $278,000; in Maryland, it was $224,048; and in New York, it was $220,000.

The median is the midpoint; half the homes sold for more, half for less. Housing industry analysts note that sales of foreclosures and other distressed properties downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Looking at Florida’s year-to-year comparison for sales of townhouse-condos, a total of 9,957 units sold statewide last month, up 1.1 percent compared to March 2012. Meanwhile, pending sales for townhouse-condos last month increased 10.6 percent compared to the year-ago figure. The statewide median for townhouse-condo properties was $120,000, up 15.9 percent over the previous year. NAR reported that the national median existing condo price in February 2013 was $172,500.

The inventory for single-family homes stood at a 5.3-months’ supply in March; inventory for townhouse-condos was at a 5.8-months’ supply, according to Florida Realtors.

“We continue to be encouraged by the depth and breadth of the housing recovery,” said Florida Realtors Chief Economist Dr. John Tuccillo. “State numbers are up in virtually all important categories and down where they should be down. Even with the difficulty of access to financing for households, we still see the growth in the market continuing for at least the next 18 months.

“Inventory remains an issue, but this is fast becoming a sellers’ market and as sellers realize this, we expect inventories to rise as we approach the last quarter of 2103. Over the long term, we need to correct the imbalance between investors and owner-occupier households that has developed because of financing issues if the market is to prosper for a long time.”

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.57 percent in March 2013, down from the 3.95 percent average during the same month a year earlier.

© 2013 Florida Realtors®

How Can The Mortgage Forgiveness Debt Relief Act Help You? | The News Tribe

How Can The Mortgage Forgiveness Debt Relief Act Help You?

By Donna Baxter - Sep 8th, 2012 (129 Comments)

 

Cancellation of a loan or debt because of foreclosure or immediate short sale at a loss can continue to be a hefty burden on the pocket because of the large amount of taxes involved. Losing your property at a lower price already places a dent on your financial standings, and the added baggage of taxes that you need to pay for the full amount can prove to be an unaffordable payment every month.

Keeping in mind these issues, the ‘Mortgage Forgiveness Debt Relief Act’ was introduced in the year 2007. So far it has proven to be a blessing in disguise for all those people who were facing tax payment problems on their loans that had been cancelled by their banks. Debt settlement can become easy and you can save up to thousands of dollars that you pay in taxes by taking advantage from this law while it lasts.

What is meant by the ‘Mortgage Forgiveness Debt Relief Act’?

The act was officially passed by the government by the end of December 2007 to facilitate those who were struggling with their cancelled loans, particularly in the event of a short sale or foreclosure. The act gives the liberty to such individuals by reporting their cancelled loans and debts to the authorities as ‘income’ and thus they can refrain from paying taxes on the entire loan amount.
For example, if your mortgage loan was higher than the price you sold your property for, you can cancel out the amount that you have lost and thus refrain from paying taxes on it.

Who is Eligible for it?

In order to take full advantage of this act, you need to fulfill the following basic requirements.
· The loan cancelled should be the debt for your main property or primary residence. Foreclosed rented property does not qualify under this act.
· The forgiven amount should be less than $2 million.
· The date of discharge of the debt should be after the 01st of January 2007. Hence, only the debts that were cancelled between 2007 to present are eligible.
· The debt should have been used entirely to purchase the property. But if the debt has been used for extensive repair, maintenance and improvement of the house, then it is also permissible.
· Refinancing, if equal to the balance of the original mortgage and used for building or maintaining the house, also falls under the act and can be relieved of taxes.

Which Debts Qualify for this Act?

The law states clearly that this act is liable for those debts that have been cancelled or forgiven due to short sale or foreclosure of the property. Therefore, in case of short sale, the difference between the amount you owed and the price that the property is sold for is waived of taxes under this act.
Similarly, in case of foreclosure, the amount remaining on the mortgage, which would normally have been considered as income, is relieved of taxation. Thus, with the help of this act, settlement of debt is made easy for the customer and scores of consumers can successfully avoid any chances of bankruptcy.

How Can You Apply For the Act?

The procedure for registering your cancelled debt as income is fairly easy and straightforward. First of all, your lender has to contact the Internal Revenue Service (IRS), fill a form with details about the type of your loan, state its full amount, state the amount of the debt that is cancelled, and state the tax return.
This form will then get forwarded to you and you can check on the details and confirm that they are correct. After the completion, you will be taxed only for the amount that you are eligible for after the cancellation of your loan.
This act is only active till the end of this year, Therefore, you need to file your request for any canceled and completed debt before this deadline. This Debt Relief Act has been specifically designed to aid and facilitate the scores of people that were indebted for a high share of money even after selling their property. Thus it can help you in saving your hard-earned cash over unnecessary tax amounts.

This Month in Real Estate (US) September 2012

This Month in Real Estate (US) August 2012

How will a short sale affect my credit report and credit score?

10 tax tips for home sellers

Real Estate Tax Talk

 

Inman News®

The IRS has recently issued a helpful list of 10 tax tips all homeowners should keep in mind when selling a home:

1. You are usually eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

 

4. If you can exclude all of the gain, you do not need to report the sale on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. If you received the first-time homebuyer credit and within 36 months of the date of purchase the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year's tax return.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

For more information about selling your home, see IRS Publication 523, Selling Your Home.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors."