DTI – Debt to Income Ratio – What is it and How Does if Affect Buying a Home

by Houtan Hormozian | Oct 18, 2024 | CRESTICO

It’s a buyer’s market!! You’ve read it, you’ve heard it and you see it everywhere you go. Signs, slogans and ads telling you it’s a buyer’s market and to get out there and buy a home! But before you log on to your local MLS or start going to open houses in your dream neighborhood, there’s one thing you should do to prepare yourself. You need to figure out HOW MUCH of a home you can afford to get out there and buy. There is no worse feeling in my opinion, then taking a tour of a gorgeous house, falling in love with it, mentally moving in and arranging your furniture JUST to find out that you can not afford it after all.

A major factor in owning a home is being able to afford it. Now, I’m not just talking about the expenses that come with home ownership in terms of maintenance, decorating, furnishing and tax. I am talking about the mortgage. Now, unless your rich Uncle Frank is leaving you a hefty inheritance, you are going to need to figure out your total monthly income and something called your DTI. This is your Debt to Income Ratio. This little fraction is going to be a key factor in the bank’s decision regarding how much money to loan you to buy your home. Basically, this is going to be a numerical expression of how much of your monthly income is already spent on bills and other expenses.

Now there are two different types of DTI: front and back. Front DTI is basically the amount of your income that is going towards your current housing costs, rent for renters and principal, interest, tax and insurance for homeowners. The other DTI is back which is basically the amount of your income that goes towards expenses like car payments, phone bills, credit cards and other kinds of recurring debt.

In order to get an FHA Loan, your front DTI needs to be about 31% which means that if your monthly income (gross) is $5,000, your payment cannot be more than $1,550. Conventional loans allow for a DTI as high as 33% which would make your payment a maximum of $1,650. Next you will need to determine your back DTI which is also based on your monthly income. Your back DTI reflects your debt and for an FHA loan is about 43% and a conforming is about 45%.

So, on that $5,000 monthly income of yours, you can have $2,150 in monthly payments for an FHA loan and $2,250 for a conventional loan. So if your car payment, student loans, credit cards, phone bill and child support expenses are less than $600 ($2,150 – $1,550), you will effectively qualify for an FHA loan.

This is something you should consider when deciding on buying a home. Although it is a buyer’s market, and there are several great deals out there; you want to make sure that a home you buy will be a home you can KEEP and that your home won’t turn into someone else’s great deal after you realize you can’t make your mortgage!

Hope For Homeowners

by Houtan Hormozian | Oct 18, 2024 | CRESTICO

Hope For Homeowners Program – How Can It Help You?

by Houtan Hormozian | Oct 18, 2024 | CRESTICO

The Hope for Homeowners program is what is being broadcast as the last hope for America’s Homeowners. Do you have a question about it? Read on for more information and feel free to use the contact information below, to get PERSONALIZED answers to any questions you may have!

As of November 19th, 2008. many changes have been made to the lending system in this country. Primarily, the loan to value ratio (LTV) has been increased from 90% to 96.50% for borrowers whose monthly mortgage payments are no more than 31 percent of their monthly gross income. Next, the process to remove subordinate liens has been simplified. Payments made up front are now allowed to motivate lienholders to give their consent and release the liens; thereby making more borrowers eligible for the program. Also, the terms of financing have been expanded and now incorporate 30 and 40 year amortization schedules, thereby reducing payments amounts.

The "HOPE for Homeowners Act of 2008" creates a new Federal Housing Administration program that will back FHA-insured mortgages to borrowers that are facing problems and stress as a result of their housing situation. New mortgages that will be offered by FHA-approved lenders will encourage and implement the Refinancing of abusive, unfair and malicious loans to dramatically improved terms that will allow distressed homeowners who are having difficulty making their mortgage payments some breathing room and enable them to keep their homes and families intact.

If you or anyone you know is facing difficulties when it comes to making their monthly mortgage payments, NOW is the time to act. If you have any questions regarding how this program could work for you, contact us and we will help you starting saving your future today!

Is Buying A Home Still a Good Investment?

by Houtan Hormozian | Oct 18, 2024 | CRESTICO

Lately, many of my colleagues and friends have been asking me whether I think buying Real Estate is still a good investment. While it may seem like renting a property that is easier to get out of, costs less to maintain and is more easily negotiable to get into is a better choice than dealing with selling agents, competitive cash offers from investors and escrows and taxes; I firmly believe that it is NOT. You may think, “Sure, of course SHE doesn’t want us to rent, she wants us to buy – that’s how she makes money” so keep reading and decide for yourself.

First we need to define what is considered a “good” investment. There used to be a time when people would see huge returns on their investments, be they in stock, bonds or real estate. In a recession however, all kinds of earnings and returns are diminished. This leaves investors to re-define their idea of a “good” investment. Sometimes, they may consider an investment that does not lose value as a “good” investment, other times nothing less than doubled value would be considered “good.” Generally speaking, according to most economic theorists and financial advisors, any investment that is yielding a 5-8% annual return is considered a “good” return. This leads us to a discussion of ROI.

Often you will find people talking about ROI. Historically, ROI (Return On Investment) has been a common method for individuals and companies to measure how “good” of an investment they have made, based on the rate of return that they have enjoyed. When trying to determine whether a particular real estate purchase is a good one – one would need to consider a few things. Real estate’s value depends mainly on its location. (I know you’re heard it “location, location, location”) Often, communities that are built to support big educational institutions or employers (think big name colleges and the neighborhoods close to them, or big factories and suburbs created to house the families of the workers) tend to enjoy more stability in terms of price and rate of return than others, even in times of depression and recession. By looking at the location of the real estate, you will have more information about whether or not it is a good investment. Surveying historical values over time in the area will allow you to see the retention of prices in the area.

Ultimately, as an investor you will need to gather information not only about the property you are considering purchasing, but also the surrounding neighborhood, historical values and proximity of institutions that can contribute to the stability in price. Overall, investing in a home, even at this time in our economy can yield the same (if not better) return as investing in stocks or other types of investments. The key difference would be that you can live in, build a home in, create a family in and achieve your dreams in a piece of real estate whereas a stock certificate can not provide these intrinsically satisfying things for you.

Mitra Karimi

Realtor – Broker

Crestico Realty

www.CresticoRealty.com

Attention Future California Homeowners! Loan limits are dropping!

by Houtan Hormozian | Oct 18, 2024 | CRESTICO