FINANCING GUIDE
The local lenders consider two ratios most important. We would emphasize that these are general “rule of thumb” guidelines. Please ask your loan officer for further details.
1. Lenders typically recommend that buyers not exceed 25-28% of gross household income foe house payment, including taxes and insurance.
2. Lenders believe that most buyers can afford 36-38% of gross household income for house payment and other long-term debts, such as car payments or other installment loans.
EXAMPLE
Monthly gross income $2500 Monthly gross income $2500
x 28 x 36
Total Monthly $700 Total for $900
payment, including of all payments
taxes and insurance
TERMS USED IN FINANCING
1. LAND CONTRACT: Sometimes called Contract for Deed or Installment Sale—a contract between buyer and seller where the buyer receives full rights of ownership in exchange for an initial down payment and a promise to pay the balance.
2. MORTGAGE: An instrument pledging real estate as collateral for a loan.
3. ASSUMABLE MORTGAGE: A mortgage that a purchaser can take over at the existing interest rate and monthly payment.
4. FIXED-RATE MORTGAGE: A mortgage with a rate of interest that remains constant for the life of the loan.
5. ADJUSTABLE- RATE MORTGAGE (ARM): A mortgage under which the interest rate and monthly payment will be periodically adjusted up or down depending on the fluctuations of a nationally published index. Home buyers can choose, in advance, how often the rate adjustments will occur. The interest rate for the initial period (usually 1-5 years) can be significantly lower than for a fixed rate mortgage. ARMs are also known as Adjustable Mortgage Loans (AML's) or Variable Rate Loans (VRM's)
If you need additional information on the Tri-County area that you did not find here, please just give us a call and we will forward specific information to you immediately.
