When you are ready to begin looking for your dream home, you will need to prepare all of the necessary materials to present to the lender. Your lender will tell you exactly what you can afford so that you do not spend time looking at “too much” home. There are four key factors that you will need to consider when determining how much home you can afford. These are:

1. The down payment
2. Your ability to qualify for a mortgage
3. What you feel comfortable with as a payment
4. The closing costs associated with your transaction

Down Payment Requirements

Most loans today require a down payment of between 3% and 5% depending on the type and terms of the loan. If you are able to come up with 20-25% down payment, you may be eligible to take advantage of special fast track programs and possibly eliminate mortgage insurance.

It is often thought that bigger is better when it comes to down payments. In many cases, this may be true. However, the arithmetic will differ from case to case. A bigger down payment means smaller monthly payments and lowers interest expense for as long as you remain with a mortgage. This can be an important factor for many people. However, if you can put your available funds to work for you so that they can earn more than the interest rate on your loan, you could be dollars ahead with a smaller down payment. Also, a smaller down payment may allow you to keep your extra cash liquid and available for an emergency.

Closing Costs

Don’t forget to think ahead carefully. In addition to the down payment on your dream home, you will be required to pay fees for loan processing and other closing costs. These fees must be paid in full in the form of a cashier’s check at the time of the final settlement, unless you are able to include these in your financing. Typically, total closing costs will range between 2-5% of your mortgage loan. Your agent may be able to negotiate a seller’s contribution for your closing costs.

Qualifying for the Mortgage

Most lenders require that your monthly payment range between 25-28% of your gross monthly income. Your mortgage payment to the lender includes four items…. The PITI. These items are discussed in detail on the section entitled, “Predicting Your Monthly Payment (The PITI).” Remember, when you buy a home all interest is tax deductible, so you will qualify for a major tax advantage that will effectively increase your take-home pay. Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. This is a general rule of thumb, but other key factors specifically determine your ability for a home loan. These factors are:

• Income - History of employment, stability of income, potential for future earnings, education, vocational training and background, and any secondary income such as bonuses, commissions, child support, etc.
• Credit Report - Histories of debt repayment, total outstanding debt and total available credit. If you have concerns about your credit report, consider contacting one of the major credit bureaus for a copy of your file: TRW (1-800-422-4879), Trans Union (1-602-933-1200), and CSC Credit (1-800-759-5979).
• Assets - Cash on hand, other liquid assets such as savings, checking, CDs, stocks, etc.
• Property - The home you are buying must be appraised to determine that it has adequate value and is marketable to ensure it will secure the loan.

Online Resources

An online affordability calculator can help you quickly estimate what you can afford.  A link to an external site is provided below.

Down Payment Calculator - (External Link to infomort.com)
Affordability Calculator - (External Link to infomort.com)

Predicting Your Monthly Payment

Your monthly payment (PITI) is the sum of four items – the principle on the loan (P), the interest on the loan (I), property taxes (T), and homeowner’s insurance (I).

Hazard Insurance covering your home for its contract value is required by your mortgage lender. You are at liberty to choose any insurance company and agent you wish. Ask your agent to quote you a policy for insurance coverage.

All property owners must pay general real estate taxes. These taxes are also called “ad valorem” taxes because the amount of the taxes varies according to the value of your property. General real estate is levied for the operations of various governmental agencies and municipalities. Other taxing bodies may include school districts, drainage, water, sanitary, and recreation districts.

Each agency or municipality determines how much money is needed for the budget. They receive these funds through mills levied against properties in their counties. The state limits how much the mill levy can increase each year without voter approval. Each mill is equal to one-thousandth of one dollar
($.001) of assessed value or $1 for every $1,000 of assessed value.

The actual tax is calculated by multiplying the assessed value by the current mill levy. General taxes are a lien against your home as of January 1st, the year of the tax, even though they are not due until the following year.

Properties are valued or assessed by the county assessor. The land and buildings are usually assessed separately. The assessed value is approximately 12-15% of the true value (percentage value is determined by state law). If an owner feels the assessed value of their property is incorrect, they can present their objection through the local taxing authority on an annual basis.

Online Resources

You can easily calculate your monthly payment by using convenient online calculators.  Links are provided below.

Monthly Payment Calculator - (External Link to infomort.com)

Downloadable Documents

These documents will help you through the buying process.

Checklist for Buying a Home - (Adobe Acrobat, 189 kilobytes)
Phone Number Worksheet - (Adobe Acrobat, 66 kilobytes)
Common Questions Asked by Realtors - (Adobe Acrobat,65 kilobytes)
Home Tour Worksheets - (Adobe Acrobat, 1.6 Megabytes)
TITAN's Guide for Home Buyers - (Adobe Acrobat, 1.6 Megabytes)

About TITAN Real Estate Group

TITAN Real Estate Group is an organization that supports the efforts of all our Agents. We work hard to provide the support, professional work environment, technology and tools for our Agents. Our dedicated team of Agents offers experience in multiple areas of the Real Estate Market throughout
the Dallas/ Ft Worth Metroplex. All of our Agents are supported by a team of professionals who are dedicated to facilitating their needs, as well as the needs of their customers. In addition to the foundation of our business, our Agents maintain a strong relationship with the lending specialists in the area to ensure that buyers are getting the best financing available!

All Real Estate Agents are required by law to have a minimum number of education hours to maintain their active license status. At TITAN we encourage our Agents to participate in ongoing education and training provided by both TITAN and other credited institutions in our area. Our Agents work hard to stay current with the inventory of homes in the areas they specialize.

Maintaining high standards encompasses all elements of our organization, from the selection process of the Agents that work under the TITAN umbrella to the professional and ethical standards that we practice every day. We recognize and appreciate the value of our relationship with our clients and want to develop a long- term relationship that is built on the grounds of trust and solid ethics in all the services we provide.

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