Uncategorized

When a lender processes your mortgage application, one of the most important factors itll consider is your debt-to-income ratio. If your ratio is too high, you may get approved for a mortgage with a high interest rate, which could add tens of thousands of dollars to your payments over the term of the loan”or your application may be denied, even if you have a good credit score and a steady job with a substantial income.

What Is Debt-to-Income Ratio?
DTI is calculated by adding up monthly debts and dividing by gross monthly income to arrive at a percentage. Some lenders factor in utilities, food, health insurance, transportation and other costs, while others dont. Most dont factor in student or car loans if theyre almost paid off.

Lenders generally want a borrower to have a debt-to-income ratio of 36 percent or below. They use an applicants DTI to figure out whether to approve a mortgage application, how much an individual can afford in mortgage payments and what interest rate to offer.

What to Do If Your DTI Is Too High
If your DTI ratio is above a lenders guidelines, you should focus on lowering it before you apply for a mortgage. If you have a lot of debt, work on paying it down and avoid making large purchases with credit cards before you apply for a mortgage. You might also want to ask your boss for a raise or take on a second job or a part-time gig to earn extra money to put toward debt.

Dont Automatically Borrow the Amount a Lender Approves
If a lender doesnt consider all monthly expenses, it may approve a borrower for a larger mortgage than the person can reasonably afford. If your lender didnt factor in all your expenses when calculating your DTI, you shouldnt borrow the full amount the lender will allow because doing so could leave you unable to afford all your bills.

DTI is based on gross income. Depending on your income, where you live, your tax bracket and other circumstances, your actual disposable income may not be enough to cover all your bills if your lender approves you for a large mortgage.

Focus on Your DTI
Your DTI ratio is a key factor that a lender will use when assessing your mortgage application. If its high, work on lowering it and getting yourself on solid financial footing before you apply for a mortgage. If a lender approves your loan application, be sure to look at your after-tax income and all your debts and expenses to figure out how much you can afford so you dont take on a larger mortgage than you can repay.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.

With all that goes into constructing a new house, building a dream home is not for the faint of heart. Undoubtedly, one of your biggest considerations will be whether to build on a developed or undeveloped plot. There are advantages to both: Because the home is new, itll likely boast modern features and energy efficiency and be built to code and secured with the builders warranty. Not a bad deal, considering the amount of home inspection horror stories out there.

Because the terms lot and land are often used interchangeably, its important to note that for the purposes of this article, lot will refer strictly to developed properties divided up by builders (i.e., located in subdivisions), and land will refer to any undeveloped piece of property.

So, lots vs. land”which is it going to be? Weigh the pros and cons below:

Lots: The Pros

• Price advantage and foreseeable price appreciation.
• Established roadways, either maintained by the municipality or by homeowners.
• Water/sewer provided.
• Electric, phone and cable lines wired.
• Builder disclosure of land concerns, such as drainage and soil.
• HOA fees typically include lawn care, trash pickup and other community maintenance.

Lots: The Cons

• Cookie-cutter floor plans.
• Minimal outdoor space.
• Close to neighbors.
• Restrictions on cosmetic changes.

Land: The Pros

• Homeowner can be involved in all aspects from start to finish.
• Cleaner air, if located in a rural area.
• More potential for eco-friendly features, such as solar panels.
• Isolation, if desired.

Land: The Cons

• Zoning changes.
• Costs to transport building materials.
• May need to install a septic or dig a well.
• May need to run electric, phone and cable lines.
• Need to install a generator and/or propane storage.
• May need to pave an access road.
• Potential land hazards, such as buried oil tanks.

Keep in mind that these lists are not exhaustive, and what works for some may not work for others”some people like living close to their neighbors, for example. Before you break ground on your dream home, make an informed decision by carefully considering all the pros and cons of developed and undeveloped plots. Happy building!

Published with permission from RISMedia.

If youve noticed unusual signs of damage around your property, pests may be to blame. Rodents, insects and other types of pests can wreak havoc on properties and cause unforeseen damage that ends up resulting in costly repairs.

Here are four signs to look for to determine whether pests are damaging your home:

Unstable Floors
The sudden feeling that the floors in your home are unstable could be a sign of a pest problem. This may be especially true if you have hardwood floors that are damaged because of termites. You might notice the boards curling on your floor as damage persists. Flaking and crumbling may also become noticeable as your floors continue to deteriorate from the damage. Crushed-looking wood at structurally significant points can be another obvious sign of a pest problem.

Tap Test Failure
Damage that’s impossible to see can sometimes be detected by performing a tap test on wood surfaces around your home. Wood that’s solid all the way through should produce a thudding sound when tapped, and any hollow sounds could mean that termites or other pests are wearing away at the wood. Hollow sounds also mean that significant portions of your wood have already been lost. Calling a termite treatment specialist and contractor to repair the damage can resolve the problem.

Electrical Problems
If lights, appliances or other equipment around your home that’s powered by electricity start to fail, you might have a pest problem on your hands. Lights that dim or completely go out, as well as appliances that don’t have as much power or fail to turn on when plugged in, could mean that pests are damaging the wires. Rodents are known to chew through wires, which can also create a fire hazard in your home.

Mud Tunnels
Tubes that appear to be made of mud may be visible in your yard and even on the side of your home. These tunnels are often constructed by organ pipe mud dauber wasps to store their larvae. Termites are also known to build tunnels that look like mud but are made from a combination of soil and wood along with a substance consisting of their saliva and feces. You might find these lining walls and floors, acting as a sure sign of infestation if you find them in your home.

Learning about the signs of pest damage will make it easier for you to act quickly to resolve the problem. Pest damage isn’t always obvious, and taking the time to perform a thorough inspection will allow you to stay on top of any situation that may arise.

Source: Meghan Belnap/RISMedia’s Housecall

Published with permission from RISMedia.

If a kitchen renovation is on your radar screen, and you plan to stay in your home long-term, you can figure on spending $20,000 or more ” especially if you plan to rip out counters and re-configure your space.

But if youre thinking of upgrades that increase your homes resale value, as well as your own enjoyment, theres a lot you can do at minimal cost to bring your kitchen up to date.

Designers advise putting your money into six specific areas to get the most bang for your update buck:

1. Appliances ” Replace basic white or black appliances with stainless steel, which will not only update the look of your kitchen but will likely be more energy efficient.
2. Cabinets ” Its amazing what a coat of white paint will do to make your kitchen pop. But if tired, old cabinets are beyond painting, re-facing them will save you big bucks over replacing them.
3. Hardware ” Replacing standard cabinet hardware with fresh, bold designs is the easiest (read, cheapest) way to upgrade the look of any kitchen. Choose hardware thats trendy, like brass, which is making a comeback, or contemporary styles that make a statement.
4. Countertops ” High end stone and ornate beveling is in vogue and expensive, but granite is becoming more affordable. Shop around for a good deal and this upgrade may cost less than you think.
5. Backsplash ” A snazzy backsplash is a focal point in the kitchen, and the right one can draw the eye away from kitchen flaws that might otherwise be glaring. Choose subway tile, which is a classic and sought-after option, or add a splash of color with a variety of reasonable materials available at most home stores.
6. Lighting ” An instant style makeover can be as simple as replacing that old overhead fixture with recessed lighting, under-counter lighting, and/or new accent lighting over a breakfast bar or kitchen table.

Published with permission from RISMedia.

Losing a home to foreclosure can be devastating, both emotionally and financially. Foreclosure has some long-term consequences that you may not expect but that could affect your life for years.

Damaged Credit
A foreclosure can cause your credit score to drop by over 200 points. It can take years of faithfully paying credit cards, auto loans and other bills on time to restore your credit to where it used to be.

In the meantime, having your credit score fall off a cliff can make it difficult or impossible to qualify for a new loan or credit card. If you do manage to get approved, youll most likely have high interest rates that can slow your financial recovery.

Housing Troubles
If you want to buy another house, youll have to wait several years before you can qualify for a mortgage. You might be able to get a new mortgage sooner if you wound up in foreclosure because of extenuating circumstances, such as a job loss, illness, injury, or death in the family, or if you apply for a loan through the Federal Housing Administration.

Until you can buy another house, youll have to rent a home or live with family or friends. If you search for a new apartment or house to rent, the landlord will most likely check your credit. A foreclosure could make the landlord decide not to rent to you.

Employment Complications
If you apply for a new job, the company may check your credit. Depending on the type of position, your foreclosure may or may not be a problem. If youre seeking a job handling a companys or clients money, a business may be unwilling to hire you if it seems that youre unable to manage your own money.

Unexpected Debts
If a lender forecloses on your home and the house is sold for less than the amount you owe, the difference is known as a deficiency. Depending on the law in your state, the lender may obtain a deficiency judgment against you and collect the money by levying your bank account or by garnishing your earnings from your job.

You might also have to pay taxes. The Internal Revenue Service considers a loan thats canceled as income, which means its subject to taxes. If youre going through foreclosure or fear that youre heading in that direction, talk to a tax professional about your potential tax burden.

Understand the Possible Implications of Foreclosure
Losing your house to foreclosure could affect many important aspects of your life long after the event. If youre facing the prospect of foreclosure, talk to your lender and a housing counselor about possible solutions to avoid it.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.