Frequently Asked Questions

Do you need to know how much money you must earn to purchase the house of your dreams? With our 'user friendly' comprehensive set of mortgage Calculators you can find the answer to this question and many others.
 

Debt-to-Income Ratios
To determine your maximum mortgage amount, lenders use guidelines called debt-to-income ratios. This is simply the percentage of your monthly gross income (before taxes) that is used to pay your monthly debts. Because there are two calculations, there is a "front" ratio and a "back" ratio and they are generally written in the following format: 33/38.

The front ratio is the percentage of your monthly gross income (before taxes) that is used to pay your housing costs, including principal, interest, taxes, insurance, mortgage insurance (when applicable) and homeowners association fees (when applicable). The back ratio is the same thing, only it also includes your monthly consumer debt. Consumer debt can be car payments, credit card debt, installment loans, and similar related expenses. Auto or life insurance is not considered a debt.

A common guideline for debt-to-income ratios is 33/38. A borrower's housing costs consume thirty-three percent of their monthly income. Add their monthly consumer debt to the housing costs, and it should take no more than thirty-eight percent of their monthly income to meet those obligations.

The guidelines are just guidelines and they are flexible. If you make a small down payment, the guidelines are more rigid. If you have marginal credit, the guidelines are more rigid. If you make a larger down payment or have sterling credit, the guidelines are less rigid. The guidelines also vary according to loan program. FHA guidelines state that a 29/41 qualifying ratio is acceptable. VA guidelines do not have a front ratio at all, but the guideline for the back ratio is 41.

Example: If you make $5000 a month, with 33/38 qualifying ratio guidelines, your maximum monthly housing cost should be around $1650. Including your consumer debt, your monthly housing and credit expenditures should be around $1900 as a maximum.
 

A home inspection is “a noninvasive visual examination of some combination of the mechanical, electrical or plumbing systems or the structural and essential components of a residential dwelling designed to identify material defects in those systems and components and performed for a fee in connection with or preparation for a proposed or possible residential real estate transfer. The term also includes any consultation regarding the property that is represented to be a home inspection or that is described by any confusingly similar term.”
 

The term does not include “an examination of a single system or component of a residential dwelling such as, for example, its electrical or plumbing system or its roof. The term also does not include an examination that is limited to inspection for, or of, one or more of the following: wood destroying insects, underground tanks and wells, septic systems, swimming pools and spas, alarm systems, air and water quality, tennis courts and playground equipment, pollutants, toxic chemicals and environmental hazards.”
 

A home inspection report must be in writing and include: (1) a description of the scope of the inspection with an identification of the structural elements, systems and subsystems covered in the report; and (2) a description of the material defects noted during the inspection with the recommendation that certain experts be retained to determine the extent of the defects and any corrective action that should be taken.
 

Closing costs are the total expenses that the buyer pays at the time a real estate transaction is completed. This stage of the transaction is called "closing." Closing costs include application, underwriting and loan-origination fees; mortgage points; title search and insurance; fees for related legal services; and costs to fund an escrow account. For home mortgage loans, closing costs generally range between 3 and 6 percent of the home purchase price.
 

Unless you select an agency relationship with a licensee there is No One Representing You. By Law, a Realtor® must have a signed Agency Relationship with a client in order to advise them about Real Estate decisions.
 

This usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.