Mortgage Rate News

One of the important considerations that mortgage lenders look at when deciding whether you will get a loan, and how much they will lend you, is your debt-to-income ratio. This ratio expresses what percentage of your income goes to paying off your debts.

For example, if your monthly income is $4,500, and your total debt payments amount to $1,300, you figure your debt-to-income ratio by dividing 1,300 by 4,500 and then multiplying the result by 100. In this case, the debt-t0-income ratio is 28.89%. Most will round it up to 29%.

Student loans and debt-to-income ratio

If you have student loans, your debt-to-income ratio will be affected. If it is too high, then you could be denied the mortgage loan you want. Helping pay down your student loans can help you improve your chances with the mortgage lenders. And, happily, there are some student loan forgiveness programs that can make this even easier.

Blueprint for Financial Prosperity offers insight into a variety of grants that can help you reduce your student loan amounts:

• Public Service Loan Forgiveness Program for those who work in a public service job for 10 years.
• Grants for teachers who work in certain areas (low income or rural, for example).
• AmeriCorps.
• PeaceCorp.
• VISTA.

I know that my mother is benefiting from a program that allows partial student loan forgiveness for those who teach in rural areas. Even though my mom already owns a home, having the student loan forgiveness will help alleviate the fact that she took them out later in her life to finish her degree.

Just as there are specific programs that can help you pay for schooling through scholarships, there are also programs that can help you pay off the debt you have incurred after you are done. Look around for opportunities to help you pay down your student loans. It’s one of the best ways to improve your debt-to-income ratio.

Tags: student loan forgiveness, student loans, home mortgage loan, mortgage loan blog,
debt-to-income ratio, mortgage lenders, public service jobs

One of the questions that I get from many people is this:

How do I know how much mortgage I can afford?

The answer, of course, is different for everyone. But I prefer to factor this into the equation: If you can afford it, it doesn’t mean you should buy it. You don’t have to spend money just because you can. In fact, it’s better if you don’t.

We were told that we could “afford” and “qualify” for a $350,000 home mortgage loan. And that was with a Alt-A 30 year fixed rate. We would have “qualified” for even more with an interest only or teaser rate ARM. But instead of getting the maximum, we instead bought a home for $187,000. It meets our needs, and will continue to do so for quite a few years. We made sure that we have room to expand a little, if we want to, and we like to have room for our frequent houseguests.

Home mortgage rule of thumb

The rule of thumb for the home mortgage is that you should not pay more than 1/3 (1/4 is better) of your monthly income on a home mortgage payment. But even then, if you can get away with paying less than that, so much the better. And that means the amount you pay after any resets. When deciding on a home mortgage, you should make your decision based on what your payments will ultimately be after any introductory periods end.

Whether or not you can afford a home mortgage should not be based on the 5-7 year period of time that you are paying less. And you can’t always guarantee that you will be able to sell or refinance before that resets. Ask the folks that are facing foreclosure as their home mortgage loan products reset.

Instead, think ahead to possible scenarios. Life is unexpected, and it is quite possible that different items, from job loss to loss of a partner to a change in family circumstances will affect your ability to make your mortgage payment. Think about the future, and try not to live at the edge of your ability.

And when you get your home mortgage loan, make sure that your payments are less than you can afford.

Tags: foreclosure, Alt-A, home mortgage loan, afford second mortgage,
mortgage loan blog, mortgage payment, loan reset

Bank of America is expected to see some serious losses with regards to home equity loans. Why? Because second home mortgages are connected to home value, and that means that as home values fall, losses due to home equity loans rise. Bloomberg reports on the current state of Bank of America:

The bank expects losses to top 2.5 percent of its $118 billion in loans linked to home values, Liam McGee, president of the Charlotte, North Carolina-based company’s consumer and small business division, said at a conference in New York sponsored by UBS AG. The bank previously projected a loss rate of between 2 percent and 2.5 percent.

Bank of America, the nation’s largest credit-card issuer, is also seeing a “recent sharp increase” in spending on necessities by its credit-card customers. That has curbed retail, travel and entertainment purchases, McGee said. Economists and bankers have said the economy may be teetering near a recession as consumers struggle with job losses and gasoline prices topping $4 a gallon.

You can also see that problems may be arising in the area credit cards as well. As more people have to turn to credit cards to cover the necessities, there could be real problems ahead.

This presents a combination problem: Home equity is tapped out, and credit cards are moving toward being maxed out. This is a trend that is sweeping the nation. The question is this: How long until Americans as a whole move from managing their debt to actually drowning in it? And consider: with home equity loans getting harder to come by, it will make it difficult for Americans to use debt consolidation to get a handle on their credit card debt.

Tags: home equity loans, home equity, home mortgage loan, mortgage loan blog,
second home mortgages, debt consolidation, credit cards