Dear Michael: I am getting pre-approved and want to know which steps my lender will take in order to qualify me for a loan?
Answer: The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as: cars, student loan payments, alimony, credit card debts, etc. According to FHA, monthly mortgage payments should not exceed 33% of your gross income. Your mortgage payment, combined with non-housing expenses, should total no more than 41% of your gross income. Your lender will also consider cash available for down payment and closing costs, credit history and your total assets when determining your maximum loan amount.
Dear Michael: I am looking at buying a specific home…it is older and built in 1954. Does an older home have a lower value then a newer home?
Answer: There isn’t a definitive answer to this question, but if a home has been remodeled extensively then the value of that home should be higher. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, and offer more charm and ambiance. People who buy older homes, however, shouldn’t mind maintaining their home and making repairs. Newer homes tend to use more modern architecture and systems and are usually easier to maintain. They may also be more energy-efficient. People who buy new homes often don’t want to worry about upkeep and repairs. It’s all a matter of taste. If you are buying an older home that has not been updated be ready to spend some money for upgrades. No matter how updated a home is, if it is not located in a good neighborhood then its value will be lower.
Dear Michael: I am in escrow on a home and my lender is suggesting we buy discount points. What are discount points?
Answer: Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point. When shopping for loans ask your lender for an interest rate with 0 points, then see how much the rate decreases with each point paid. Discount points are smart if you plan on staying in a home for a long period of time. Discount points are also tax deductible.
Michael Kayem is a Realtor with Re/max Estate Properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or e-mail them to him at: homes@agentmichael.com