Determine How Much Mortgage You Can Afford – Tips

By knowing how much mortgage you can afford, you can ensure that home ownership will fit in your budget and meet your long term goals.

1. Factor in Your Down Payment

How much cash do you have for a down payment on DFW real estate? The higher the down payment you can come up with the lower your monthly payments will be. If you put down at least 20% of the home's cost, you may not be required to get private mortgage insurance which costs hundreds each month. This leaves more money for you to put towards your mortgage payment. The lower your down payment, the higher the interest rate, loan amount you will need to qualify for and the higher your monthly mortgage payment will be.

 

2. Consider Your Total Debt

When it comes to buying Plano real estate most mortgage lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn't total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like auto loans and credit cards, shouldn't exceed 41% of your gross annual income. Here's how that works. If your gross annual income is $50,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $1,167 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don't go above 41%, or $1,708 in our example.

 

3. Use Your Rent Amount as a Guide

The tax benefits of homeownership usually help you to afford a mortgage payment of about one third more than your current rent payment. You can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment. Here's an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership. If you're struggling to keep up with your rent however, consider what amount would be comfortable and use that for the calculation instead. Also consider whether or not you will itemize your tax deductions. If you take the standard tax deduction, you cannot deduct mortgage interest payments. Find a Dallas real estate blog that has tools on them to help you calculate these numbers.

 

4. The general rule of mortgage affordability

A good rule of thumb; you can typically afford a home priced about two to three times your gross income. If you earn $50,000, you can typically afford a home between $150,000 and $200,000. To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs. This takes a little bit of brain power and effort but it is paramount before you go start looking for that perfect home.

Dallas Real Estate and Title Insurance Policies

What is Title Insurance and why do I need it when buying Dallas real estate? To understand title insurance, let's look at what is known as "chain of title" and how title companies search public records. Title searches begin with when the US government claimed the land using a U. S. patent and moving forward from that point. Because people are involved in recording deed transfers and plotting land parcels, a lot of mistakes can happen. You want title insurance because it will protect you against these defects and "people errors".

Public Records and Property Searches

• County records are often maintained at local courthouses or the Clerk of Registrars.
• Property transfers were first recorded alphabetically in separate Grantee and Grantor books.
• Today, most records are stored in computer files.
• Dallas foreclosures will also be shown in the public records.

Land Division

• Early deeds involved large chunks of land known as Townships.
• Townships contain 36 sections and are six miles by six miles.
• Sections measure one mile by one mile and contain 640 acres.
• Half of a section is 320 acres.
• 1/4 of a section is 160 acres.
• 1/4 section of 1/4 section is 40 acres.
• An acre is 43,560 square feet

Basic Title Search

• Title searches start with the most recent deed, searching the grantee's name backwards in time, until the deed when the grantee acquired the property is located.
• That grantor's name is then searched backwards in time in the grantee's book to find when the grantor acquired title as a grantee.
• This process continues and the property description involves larger and larger parcels of land.
• Eventually, the searcher gets to the U. S. Patent.
• You can learn more about Title Searches by visiting popular Dallas real estate blogs.

Factors That Affect Title

As we discussed deeds establish a chain of title, but sometimes these chains get broken. Title searchers also look for reconveyances, easements, rights-of-way and other elements affecting title to the property. Here are more records that are searched to piece title together:

• Tax sales
• Death certificates
• Marriage records

Title Insurance Coverage

Depending on the title company, consumers can choose among a variety of options, but the top three choices are Owners, Lender's and Extended Coverage.

• Lender's Title Policy Coverage:

1. Unrecorded easements and access rights
2. Mechanic's liens and unrecorded liens
3. Defects and other unrecorded documents

• Owner's Title Policy Coverage:

1. Defective recordation
2. Clear title to the property
3. Incorrect signatures on documents
4. Forgery, fraud
5. Restrictive covenants
6. Encumbrances or judgments

• Owner's Coverage - Extended

1. Structure damage from mineral extractions
2. Building permit violations from previous owners
3. Subdivision maps
4. Covenant violations from previous owners
5. Variety of encroachments and forgeries after title insurance is issued

Who Pays For the Title Policy Insurance Policy?

• This can differ from county to county, but it is negotiable in the offer to purchase.
• Sellers and buyers split the fee for the owner's policy.
• Generally, the buyer pays for the lender's coverage.

How Long Are Title Insurance Policies Good For?

The simple answer is, forever. If you are planning to resell the property within a few years, ask your title company about what is known as "binder" coverage. Most title companies will sell you a binder policy for an additional 10% premium. Binder coverage is good for two years, often can be extended beyond that time, and the fee charged for the new buyer's policy will be the difference between what you bought the property for and the price at which it sold. You will get a credit for the amount of coverage you purchased under your own Owner's Title policy.

 

How Often Are Title Policy Insurance Premiums Paid?

This is a onetime premium due when you buy. You will never have to pay an additional premium on this policy. Title policy insurance is the best insurance policy a Dallas real estate owner can ever buy.

Before You Sell Your DFW Home

When it comes time to sell your DFW home you may decide to sell it for sale by owner (FSBO), but you may find great benefit in listing it with one of the many professional DFW Realtors.  if you decided to use a Realtor, pay attention as you research the market place for the one that is the best fit for you.

Research Real Estate Agents and Firms

DFW Real Estate

Which brokerage firms rank at the top of major search engines for common search terms in your area? Like DFW Real Estate for example?

Which firm’s websites are the most appealing?

Which firms consistently feature virtual tours on their Listings?

Does the firm provide multiple photos of homes and in good quality?

Which firms advertise in multiple internet venues?  Which firms have a Dallas Real Estate Blog?

Ask your co-workers and friends for Realtor referrals. Maybe they have worked with an agent who did a great job?

Whether you are selling Dallas real estate or Plano real estate, once you have compiled a list of Realtors, set an appointment with each of them to learn more about their experience and services. Find out if these Realtors are willing to do a free comparative market analysis (CMA), a process that compares your home to similar homes that have recently sold. Realtors use this tool to help sellers set their listing prices.

Interviewing Realtors

Ask each Realtor that you interview to explain how they will market your house, including print, internet and other types of marketing.

Find out if the firm belongs to more than one MLS service. In some areas there's an overlap of regions, making multiple MLS memberships important.

Will the firm place your house in the MLS immediately making your home available to every possible Realtor greatly increasing your market exposure?

How much commission do they charge? How does it compare to that of other local firms that offer the same services?

What's the average length of time it takes to sell a house in your area?  Sometimes known as DOM for Days on Market. What is their company's average DOM?

Find out how long they want you to list with them.

How long has the listing Realtor been selling real estate?

What percentage of the firms listings sell during the initial listing contract period?

Buyer feedback is a very important tool. If every potential buyer makes the same negative comment, you should consider taking action to resolve the issue. How often can you expect to receive this feedback?

Will the agent hold an open house for other real estate agents? For potential buyers?

How are house showings handled? Will you receive advance notification that an agent is coming to show your house?  You can put restrictions on showings like certain days or times are off limits?  Keep in mind doing this may cut down on the number of times your house is shown.

If your new home will be in the same area, ask the agent any questions you may have as a buyer. You may choose to use the same Realtor to buy and sell.

If you have pets, make sure the Realtor is committed to a plan that ensures their safety. If it's a dog that bites, you will need a plan for buyer safety as well.

Does the firm use electronic security lockboxes? Many firms place a key inside a box that is secured to your home. Ask the Realtor to explain how it works.

Estimating Some Home Selling Costs

Ask the Realtors you are interviewing to give you an estimate of typical seller closing costs.

Ask how your share of property taxes for the year is calculated and prorated.

Ask about the amount of Attorney or other professional fees.

What will your share of property owner association fees (HOA) be?

What will be the total amount of the real estate commission?

Get a list of any other expenses that sellers are typically expected to pay, ie. inspections, surveys, certifications, pest inspections, etc.

Make sure to ask these Realtors any other questions that are important to you.  Your decision to hire a particular Realtor should be based in part on your gut feeling that the two of you can work together.  You don't need the biggest agency in town, the busiest agent, or the agent with the most experience. You need an agent who will market your home aggressively, to both buyers and other agents.