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How Much Income Do You Need To Buy A House? | Pound Ridge NY Real Estate

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Source: flickr user images of money

If you’re in the market for a new home, chances are you’ll have to compromise at some point along the way. Maybe you’ll have to commute a little farther than you’d like in order to get the best value for your money. Or perhaps you’ll forgo a huge backyard to be closer to the city.

And when it comes to finances, you might find a disparity between how much house you want and how much house you can purchase given your gross monthly income and other factors.

Home loans are made against your ability to repay. While the mortgage loan is secured against the house, it is really made against your income. That’s what mortgage lenders look for — income to offset liabilities.

Simply put, the amount of income you need to purchase a house will vary by your payment comfort level, including any other monthly debt obligations you might have.

Important terms

Mortgage payment: Principal, interest, property taxes insurance and mortgage insurance, if needed

Consumer debts: Minimum payment obligations on things such as auto loans, credit cards, student loans, personal loans and installment loans

Other debt obligations: Alimony and/or child support or any other court-ordered repayment obligations

Running the math

Here’s a simple formula to calculate the amount of income you’ll need to purchase a home:

Target mortgage payment + consumer debts ÷ .36 = Gross monthly income needed to qualify

Most lenders limit your debt-to-income ratio (how much of your monthly income pays debt) to between 36 percent and 45 percent. While the exact ratio varies by lender and loan type, it’s best to base your calculations on the lower end to ensure that you won’t overextend yourself financially.

So, if your target mortgage payment is $2,000 per month and you have consumer debts of $300 per month, you will need $6,388 gross monthly income to offset your housing expenses and consumer obligations.

Down payment

Your down payment is another important factor in determining how much income you’ll need to buy a home.

Consider the following loan scenario using a purchase price of $300,000 (assuming no other debts) and the current rates on Zillow Mortgage Marketplace.

Conventional loan

  • Down payment: 5 percent ($15,000)
  • Interest rate: 3.26 percent
  • Approximate mortgage payment: $1,770
  • Gross monthly income needed: $4,916

So at the end of the day how much income you need to purchase a home is predicated on your monthly income, consumer debt obligations and down payment.

Impact of debt

For every dollar of debt, you will need double that in income. So if you have a $300 car payment, you’ll need at least $600 per month or more in income to offset that debt.

Debt erodes income, and less income translates to less purchasing power.

So, does buying a home make sense?

Yes, so long as the amount you can borrow from Personal Loan Lenders for your desired purchase price is in sync with your debt obligations and, of course, your down payment.

via zillow.com

Relevant is the New Black – Stop Sucking and Start Mattering | Pound Ridge Real Estate

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This isn’t breaking news or an exclusive by any means.

If I did years of extensive research, analyzed data, built fancy charts, used 3-D graphs on my iPad, and touted inarguable, NAR homebuyer and seller survey-backed findings, it would lead to just five words.

Follow-up in real estate sucks.

I define “sucks” two different ways.

The first: It sucks that there is not more time in each day to follow up with people you have already built a good relationship with or helped buy or sell a home. If someone is not currently in the market to buy or sell, only so many minutes can be allotted to relationship maintenance.

Especially, I should add, if you actually produce significant GCI (gross commission income) or carry a lot of listings.

I wish there were a perfect world. One where all you did was chit-chatted with friends on Facebook all day whom you worked with previously, just calling your sphere to say hello and asking how the kids are.

Too bad you are busy as hell and reality is such an important thing to consider when running a business.

Bottom line? Past clients and referrals make or break your business, but you could likely receive more if you followed up effectively.

The other way follow-up sucks in real estate is that it lacks the most important thing in marketing right now: context.

As the social Web has evolved, experiences are becoming increasingly personalized. This includes ads and marketing messages that we are exposed to.

This change means you need to completely re-evaluate your follow-up marketing strategy with your sphere of influence.

Here’s why: When an ad runs in my stream on Facebook that says, “Are you 33? Do you love your iPad? Kids using it too?” The answers are yes and yes and yes. I actually welcome ads like that with open arms. I can’t wait to click them and see where they lead.

Meanwhile in the real estate industry I see marketing like: fajita recipe cards, sports calendars, set-your-clock-back reminders, open house invitations, emailed market reports, and just listed/just sold postcards.

These are things that lack context with 95 percent of people with a pulse.

You have to go deeper in 2012.

In fact, either dig deep or go to sleep (feel free to tweet that).

With everything you do moving forward, please take a moment and ask yourself, whether it is a post card, business card, Facebook update, tweet or phone call, “Is this RELEVANT to the recipient?”

Don’t bullshit here either. Be honest with yourself. It’s critical.

Relevant is the new black.

Contactually, a popular new social CRM (customer relationship manager), can help your efforts towards increased relevancy, both tremendously and immediately.

Money and Happiness

It makes staying in touch with the right contacts fun and simple. I especially enjoy the way it helps you segment your social and email databases into relevant categories. It happens in an interactive game called “The bucket game.” It’s a jovial and quick way to get your unorganized list of contacts into one or more categories (like buyer, seller, past client, Facebook friend, etc.) By approaching this tedious task with a gaming approach, it is actually really fun and you are done in no time at all.

Bucket Your Contacts

Contactually connects your email and social media accounts, analyzes your history with each relationship, and automatically prompts you in a daily email to re-engage with important people who are slipping off your radar.

By leveraging the social graph, anytime you call, email, tweet, Facebook or LinkedIn message someone from Contactually, you have what is relevant to them, in real time, in the form of their live social streams. If their latest tweet was about their kid’s baseball game, there is your reason to call.

The paid version of Contactually also brings integration into Gmail, Salesforce, Highrise, and many other popular and robust CRMs.

Increased context and relevancy with your sphere of influence, with a little help from a software. I dig it.

Of all the dings in your agent armor, an important person slipping off your radar should be considered a big, fat dent. Avoided at all costs.

If your current marketing efforts are extinguishing more interest in what you do than they are generating actual new business, time for a pivot.

You can learn more about Contactually or sign up for a 30-day free trial now.

Or you can reorder sports calendars for 2013. The choice is yours.

via next.inman.com

Homeowners Recover 13.5 Percent of Lost Equity Through Q3 | Pound Ridge Real Estate

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Rising home values have brought homeowner equity to its highest level since the third quarter of 2008 and helped lift 1.3 million families above water. Homeowner equity jumped $406 billion, or 5.9 percent, to $7,275 billion in the second quarter of 2012, according to the Obama Administration’s September Housing Scorecard.

After a sharp first quarter rise, total equity has grown to $863 billion, or 13.5 percent, since the end of 2011. The number of underwater borrowers has declined by 11 percent since the end of last year, from 12.1 million in the 4th quarter of 2011 to 10.8 million in the second quarter of 2012.

Nearly 1.3 million homeowner assistance actions have taken place through the Making Home Affordable Program, while the Federal Housing Administration (FHA) has offered more than 1.4 million loss mitigation and early delinquency interventions. The Administration’s programs continue to encourage improved standards and processes in the industry, with HOPE Now lenders offering families and individuals more than three million proprietary mortgage modifications through July.

As of August, more than one million homeowners have received a permanent HAMP modification, saving approximately $539 apiece on their mortgage payments each month, and an estimated $15 billion to date. In August, 81 percent of homeowners with eligible non-GSE mortgages benefitted from principal reduction with their HAMP modification. Eighty-seven percent of homeowners entering the program in the last two years have received a permanent modification.

“As the September housing scorecard indicates, our housing market is showing important signs of recovery – with homeowner equity at a four-year high and summer sales of existing homes at the strongest pace in two years,” said HUD Acting Assistant Secretary Erika Poethig. “The Administration’s efforts to keep housing affordable and refinances strong are critical with so many households still struggling to make ends meet. That is why we continue to ask Congress to approve the President’s refinancing proposal so that more homeowners can secure the help they need.”

Rising home values have brought homeowner equity to its highest level since the third quarter of 2008 and helped lift 1.3 million families above water. Homeowner equity jumped $406 billion, or 5.9 percent, to $7,275 billion in the second quarter of 2012.  After a sharp first quarter rise, total equity has grown to $863 billion, or 13.5 percent, since the end of 2011. The number of underwater borrowers has declined by 11 percent since the end of last year, from 12.1 million in the 4th quarter of 2011 to 10.8 million in the second quarter of 2012.

The Administration’s foreclosure programs are providing relief for millions of homeowners as we continue to recover from an unprecedented housing crisis.  Nearly 1.3 million homeowner assistance actions have taken place through the Making Home Affordable Program, while the Federal Housing Administration (FHA) has offered more than 1.4 million loss mitigation and early delinquency interventions. The Administration’s programs continue to encourage improved standards and processes in the industry, with HOPE Now lenders offering families and individuals more than three million proprietary mortgage modifications through July.

Homeowners entering HAMP continue to benefit from deep and sustainable assistance. As of August, more than one million homeowners have received a permanent HAMP modification, saving approximately $539 on their mortgage payments each month, and an estimated $15 billion to date. In August, 81 percent of homeowners with eligible non-GSE mortgages benefitted from principal reduction with their HAMP modification. Eighty-seven percent of homeowners entering the program in the last two years have received a permanent modification

via realestateeconomywatch.com

Eight More Months of Pain | Pound Ridge Real Estate for sale

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Housing prices will drop four more percentage points and they won’t bottom out until next fall. That’s the latest forecast from Standard & Poor’s housing experts, from a Webcast on the US Housing Market distributed to investors and the media.

The 1.6 to 2 million properties that will be released following the finalization of the multi-state attorneys general settlement yesterday will depress housing markets enough to drive prices down another four points in the S&P/ Case-Shiller index, the experts said.

“The shadow inventory is a key concern for the housing market. There are about 4 million homes sold annually. We don’t expect them to dump all two million on the market all at once. That’s the reason for our estimate that prices won’t bottom out until the fall,” said Erkan Erturk, Senior Director, Structured Finance Global Research.

The S&P/ Case-Shiller Index has fallen 34 percent since its peak in 2006 and reached a new low in December. It is expected to fall four more points before the bottom is reached, said Beth Ann Bovino S&P Ratings Service’s deputy chief economist.

“Prices are affordable. Mortgage rates are low. Yet people are afraid to buy,” she said. She said unemployment will remain high as long-time unemployed and under employed workers re-enter the work force.

via realestateeconomywatch.com