Home prices have fallen. Homes have become more affordable to purchase. Interest rates are at record lows. It is an excellent time to buy a home. Do you want to purchase a home? There are reasons why you may not be able to. Here are some of those reasons:
1. Your debt to income ratio is at or above 40%. Debt to income ratio (DTI) is the amount of your monthly expenses to maintain where you live plus other recurring monthly debt divided by your total monthly income. Most mortgage loan programs require your DTI be at or below 40%. Here is how you determine whether a house you are looking at is affordable. First calculate your DTI. Then calculate your proposed mortgage payments and add your minimum monthly debt obligations. Then divide this by the total amount of your gross monthly income. To calculate your maximum mortgage payment multiply gross monthly income times 0.40 (DTI) minus all minimum monthly debt obligations.
2. You work for yourself and the schedule C of your income tax return shows losses. Many individuals who are self-employed owned companies that showed tax losses at the end of the year. These income tax returns have a schedule C. If the schedule C does not show a profit, financial institutions will be hesitant to loan you money.
3. You have significant deposits at a bank but you can’t document where this money came from. In other words, one way or another you’re making cash and there is no paper trail for it. Banks do not like this!
4. The down payment on your home is a gift. If the down payment on your home is a gift from a parent, friend, relative or other individual it will be necessary for you to document this gift on an affidavit from the person who gave it to you. Banks are very skittish about gifts from anonymous individuals!
5. The home has termites. If the home has termites or other pests, it is necessary that this condition is dealt with and all structural damage to the home rectified before a financial institution will loan you money on the home.
6. You seek to purchase a home you simply can’t afford. When buying a home you should have realistic expectations. If you are making $50,000 a year, you can’t afford a home that costs $400,000 or $500,000. Buyers often go to real estate brokers who show them homes they fall in love with but they can’t afford to purchase. If you are a prospective home purchaser, you must to do an analysis of what you can afford and make compromises on what you really want and what is within your budget.
About The Author
Elliot S Schlissel, Esq. is an attorney with more than 45 years of legal experience. His law office represents clients regarding foreclosures defense issues, defective mortgages, foreclosure actions and all types of predatory lending issues.
