Biloxi, MS

Understanding how much you can afford is one of the most important rules of home buying. Depending on your individual situation, your budget can affect everything from the neighborhoods where you look, to the size of the house, and even what type of financing you choose.

Bear in mind, however, that lenders will look at more than just your income to determine the size of the loan. Likewise, you may find that there are some creative financing options that can help boost your purchasing power.

Loan prequalification vs. preapproval
One of the best ways to determine your budget is to have your real estate agent or lender prequalify you for a loan. Prequalification is different from preapproval, because it is only an estimate of what you'll be able to afford. On the other hand, preapproval is a more formal process where a lender examines your finances and agrees in advance to loan you money up to a specified amount.

What factors are important to lenders?
Banks and lending institutions will use several criteria to determine how much money they'll agree to lend. These include:

• Your gross monthly income
• Your credit history
• The amount of your outstanding debts
• Your savings--or the amount of money you have available for a down payment and closing costs
• Your choice of mortgage (i.e. 30-year, FHA, etc.)
• Current interest rates

Two important ratios
Lenders also use your financial information to figure out two, very important ratios: the debt-to-income ratio and the housing expense ratio.

• Debt-to-income ratio
  Many lenders use a rule of thumb that the amount of debt you are paying on each month (car payment, student loan, credit card, etc,) shouldn't exceed more than 36 percent of your gross monthly income. FHA loans are slightly more lenient.
  
  
• Housing expense ratio
  It is generally difficult to obtain a loan if the mortgage payment will be more than 28 to 33 percent of your gross monthly income.
  

Down payments make a difference
If you can make a large down payment, lenders may be more lenient with their qualifying ratios. For example, a person with a 20 percent down payment may be qualified with the 33 percent housing expense ratio, while someone with a 5 percent down payment is held to the stricter 28 percent ratio.

Other ways to improve your purchasing power

• Gifts
  If you're having trouble saving money, many lenders will allow you to use gift funds for the down payment and closing costs. However, most lenders require a "gift letter" stating the gift doesn't have to be repaid, and will also require you to pay at least a portion of the down payment with your own cash.
  
  
• Negotiating Closing Costs
  Through negotiation, some sellers may agree to pay all or most of your closing costs (for example, if you agree to meet their full asking price). If you choose to try this, make sure to ask your real estate agent for advice.
  
  
• Loan Programs
  Many local governments have special loan programs designed to help first-time homebuyers. Loans may be available at reduced interest rates, or with little or no down payments. Check with your local housing authority for more information.
  
  
• Loan Types
  Some homebuyers choose Adjustable Rate Mortgages (ARMs) because of low initial interest rates. Others opt for 30-year loans because they have lower monthly payments than 15-year loans. There are significant differences between different loans, so make sure to discuss the pros and cons of different loans with your agent or lender before making a decision.
  

MOST BUYERS CAN STILL QUALIFY FOR A MORTGAGE LOAN WITH 580 CREDIT SCORE!

Credit applicants with lower scores generally must have more bank reserves and lenders still look at debt ratios -- the percentage of income a person spends on debt each month.

FHA lending guidelines allow for some buyers with 580 credit scores to purchase homes for as little as *3 percent down and are still allowed to use down payment assistance programs, gifts and secured loans. * 3.5% required down payment goes into effect Januaray 1 2009, keep in mind the assistance can still be used so little money out of pocket for the buyer is still avaliable.

By combining a Federal Housing Authority first mortgage with a Mississippi Housing Finance Authority second mortgage( MHC), banks can finance purchases up to $250,000 with no money down with low interest rates with credit scores of 580 or higher.

Not every applicant with a 580 will qualify, but some will. As the credit score climbs, so does the applicant's chances of getting the loan. We can help get them to that point.

Once the credit score reaches the 650 neighborhood, the majority of applicants will be approved, given the exception of documenting the income.

No one knows where Mortgages will be a year from now but today conforming financing is still avalioable and with good deals out there,

"Now is a good time to buy," . "Now, you can qualify."

The national focus on the credit crunch doesn't reflect the situation in a lot of areas in the US and may be causing some people to be surprised by the financing that is available.

Most FHA, VA and RD borrowers are still getting into homes with little to no money down.

Now is a good time for borrowers because interest rates remain well below the long-term average.

In an ever changing market the consumer is going to be subjected to marketing efforts by mortgage companies to offset the decline of refinance business along with the current crash of non conforming lenders. Recently a number of NO CLOSING COST ads are hitting the television and print news. The Consumer should be aware that although they will not be paying the closing cost, someone (the lender) will. In order for the lender to absorb the cost of an appraisal, title insurance, their fees, etc. they will increase your interest rate to offset those costs. Although this is not a bad program, the consumer should be aware that the lender paid closing cost are an option on any program, should you wish to take the higher rate. If you simply wish to look at a quick calculation, take the cost of all fees, (DO NOT include prepaid items i.e. insurance, taxes, and prepaid interest) for example on a $ 100,000 loan, we will assume $ 1500.00 closing cost at no origination fee/ no discount loan and a rate of 6.375%. A NO closing cost loan at a rate of 6.75%

$ 100,000 @ 6.375% over 30 years is a payment of $ 623.88

$ 100,000 @ 6.750% over 30 years is a payment of $ 648.61

Based on our scenario the lender is paying $ 1500 for the NO CLOSING COST loan. This is when the consumer must decide whether the $ 24.73 additional monthly mortgage payment is worth the NO CLOSING COST option. This is where the consumer must consider their personal financial circumstances and make an informed decision. If the current rate is higher then it is a given that you would want to take the option unless you are extending your mortgage out for a much longer term. If you are only going to be in the home for another two or three years it may not be an option to consider. Borrowers should compare a rate with closing cost and then ask for the NO CLOSING COST option and then do the math. If your lender can not explain your options or assist you in calculating your personal case................. Find another lender.

Sunny Mortgage Group

KS

Growing-up I loved living in Biloxi, Harrison County, Mississippi. Now managing properties all over the country I still have many of my properties here because of the beauty that remains in this area. Mississippi is a state of wide range of living environments. The market has seemed to slow a bit for me in the past few years, but I'm hoping to bring more people back and open up more establishments.