How Much Home Can You Afford?

Whether you are ready to achieve the dream of homeownership for the first time or are selling your current home and making the move to a new property, understanding how much you can comfortably afford to spend on your new house is key.

Important factors to consider are your down payment and the total monthly cost of your proposed mortgage in relation to your monthly income.

Your down payment is the money you plan to put towards your home purchase upfront. A larger down payment reduces the amount of your loan, and some loan programs require a certain percentage of the value of your home to be made in the initial down payment. However, there are specific low and no down payment loan programs available in some areas for qualified borrowers.

The most common recommendation for spending on your home is that the total monthly cost should not exceed 28% of your gross (pre-tax) monthly income. Many experts also recommend that your total monthly loan payments, including car and credit card payments, should not exceed 36% of your gross monthly income. This is a middle-of-the-road approach, meaning that some experts recommend higher or lower percentages. It is possible to qualify for a home loan with higher percentages, so keep your overall financial picture in mind when coming to a decision on how much to spend.

Understanding the total monthly cost of your home requires factoring in the sale price, mortgage loan interest rate, property taxes, and any mortgage insurance or homeowner’s association fees. While there are many mortgage payment calculators available online, a loan officer can provide you with the most accurate payment estimate.

If you have any questions about home affordability or available low and no down payment programs, reach out to one of our loan officers today! We are utilizing a variety of communication technologies to continue providing exceptional service to our clients while maintaining social distancing.

Mortgage Calculators

Here at First Home Mortgage, we strive to deliver excellent customer service from the start. We provide tools and resources to better prepare you for purchasing or refinancing your home. Whether you’re buying a home for the first time, you’ve purchased before, or you are refinancing, you will have questions and concerns. “What will my mortgage payment be?”, “How do I know it’s a good time to refinance?”, “What can I afford?” – these are all very important questions that will be the basis of your journey. With these questions in mind, we have provided 9 different mortgage calculators to help you get started!

Mortgage Calculator #1: Mortgage Payment

Repayment of a mortgage loan requires the borrower to make a monthly payment back to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance.

Mortgage Calculator #2: Proceeds from Sale of a Home

How much profit will you make if you sell your home? This is largely dependent on two things: the amount you still owe on the home and what you will have to pay for selling the home.

Mortgage Calculator #3: Compare Two Mortgage Loans

When purchasing a home, the mortgage you choose and the options you want with it will have a significant impact on how much your home costs you in the long run.

Mortgage Calculator #4: Time to Refinance?

The decision to refinance a home mortgage can involve many factors. You might want to take cash out of your home and apply it elsewhere or obtain a lower rate to lower your monthly payments.

Mortgage Calculator #5: Debt to Income Calculator

Your DTI is the percentage of your gross income used to cover your mortgage and other debt payments. This ratio and your credit score are two key factors used to determine if you qualify for a loan.

Mortgage Calculator #6: Rent vs Buy

Deciding whether to rent or buy relies on many factors. Take into consideration the difference in monthly rent vs. mortgage payment, home value, rent increases, interest rate, and taxes to name a few.

Mortgage Calculator #7: Home Affordability

Your ability to obtain a loan for a new home purchase is based on several aspects. Lenders typically focus on three key ratios: Loan-to-Value ratio, Housing Ratio, and Debt-to-Income ratio.

Mortgage Calculator #8: Adjustable Rate Mortgage Analyzer

ARMs typically offer home buyers the advantage of having a lower mortgage payment during the initial period of the mortgage. Once the initial period expires, the rate will reset at current interest rate levels.

Mortgage Calculator #9: Compare a Bi-Weekly Mortgage to a Monthly Mortgage

One popular strategy for accelerating the payoff of a loan is to make ‘Bi-Weekly’ payments. Under a Bi-Weekly mortgage plan, you will make payments to your lender every two weeks instead of monthly.

While we consider these mortgage loan calculators to be very helpful and educational, everyone’s personal situation varies, and reaching out to one of our Loan Officers will give you a more accurate sense of what you would be facing! Find a Loan Officer in your area today!

5 Fun & Easy Ideas to Make the Most of Your Home During Quarantine

With so many of us enjoying plenty of extra hours in our homes right now, it’s an ideal time to tackle some small but impactful projects to maintain and improve your space. We’ve compiled a list of our 5 favorite ideas, that all require minimal supplies to accomplish!

1. Organize!

This may not be the most exciting task for everyone to tackle, but organizing and reducing clutter makes your home more functional and enjoyable now and in the future.

Some common hotspots include kitchen drawers and cabinets, bedroom closets, home offices, and other frequently used areas. Cutting through the clutter and putting everything in its place can be a time-consuming process, but the finished results are well worth it! Find some inspiring before and after pics here!

2. Plant a Kitchen Herb Garden

An indoor herb garden is a beginner-level gardening project that reaps big rewards. Indoor plants help clean the air in your home, and fresh herbs are delicious to cook with! You can get creative with containers and use items you already have. Teacups and teapots are an attractive option, but even Tupperware works! Find a list of popular kitchen garden herbs here!

3. Rearrange Your Furniture – Or Go All Out and Refinish it.

Simply shifting the items you already have in a room can transform it. This can help relieve the boredom of spending so much time in the same place. Try a few different layouts and pick the one you like best. If you get tired of your new arrangement, change it up again!  If you want to impact your lookup, even more, this is also a good time to refinish any furniture that needs it, or that you’d rather have in a different color!

4. Paint! Paint! Paint!

Touch up paint anywhere that needs it – from walls and ceilings to baseboards to cabinets. Try out an accent wall or new front door color for some extra punch! Check out baseboard painting tips here!

5. Switch Things Up

Change out the photos in your wall frames, update your air vent covers, or swap out your cabinet and drawer knobs for something different. These changes take a bit of time but don’t require anything more than a screwdriver!

Making the most of your extra time at home with easy projects can help pass the time, ease the monotony and boost your enjoyment of your home!

We’re all practicing social distancing at First Home Mortgage, but with today’s range of communication technology, our loan officers can still offer you personalized service while keeping everyone safe. If you have questions about purchasing or refinancing a home, contact one of our experienced loan officers today!

Home Buying Lingo You Need to Know

The home-buying industry is full of acronyms. It can be hard to keep up, so we’re here to help! Learn the lingo before going through the home buying process so you sound like a pro. Here are some of the most important acronyms you need to know:

APR (Annual Percentage Rate): The APR is simply the interest rate you pay on a loan annually. Basically, it is the cost of borrowing money from a financial institution.

ARM (Adjustable Rate Mortgage): An ARM is a mortgage with an interest that can increase or decrease depending on various factors. Adjustable-rate mortgages often begin with low-interest rates, even below market rate sometimes, but the rate does increase or decrease based on a standard financial index set by the Federal Reserve or the London Interbank Offered Rate (LIBOR).

CD (Closing Disclosure): The Closing Disclosure is a 5-page form provided to you by your lender usually 3 days prior to closing. The final terms and costs of your mortgage are outlined in the CD. This document is very important to review thoroughly so there are no surprises at closing.

DTI (Debt-to-Income) ratio: The debt-to-income ratio compares your monthly gross income to your monthly debt payments. Simply put, lenders look at the percentage of your monthly gross income that is paid towards your debt payments every month.

FICO (Fair Isaac Corporation): FICO is the first company to offer a credit risk model represented by a score. The credit score model FICO is still the primary method to determine your creditworthiness.

FHA (Federal Housing Administration): FHA is a government agency that sets standards for construction and underwriting. The FHA insures loans made by private lenders and banks for home building.

LE (Loan Estimate): A Loan Estimate is a 3-page document provided at the beginning of the home loan process that provides an estimate of the costs you can expect. This breakdown will include costs such as closing fees, interest rate, and your loan amount.

LOX (Letter of Explanation): This is a letter written by you to address or explain anything in your employment or financial documents that may be a cause for concern. This could include sudden or unusual activity in your credit report or bank statements.

LTV (Loan-to-Value) ratio: The LTV ratio is used to determine the risk factor for a lender taking on a loan. The LTV ratio measures the loan amount compared to the market value of the asset.

PITI (Principal, Interest, Taxes, and Insurance): This acronym represents the sum components that equal your monthly mortgage payment.

PMI (Personal Mortgage Insurance): Personal mortgage insurance is a type of insurance that you may be required to purchase if you have a conventional loan. PMI is usually required when your down payment is less than 20% of the purchase price. PMI is used to protect the lender in the event you stop making your mortgage payments.

POC (Paid Outside of Closing): Any fee or payment that will need to be paid outside of the normal fees due at the time of closing a loan. Appraisal fees, for example, are due at the time of service and would need to be paid before closing.

Do you have any follow-up questions to the above acronyms or would you like our loan officers to walk you through the homebuying process? Contact one of our loan officers today!

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