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A Quick Tip On How To Maximize Your Buying Power When Purchasing A Home A first time homebuyer needs to know how monthly consumer payments affect their ability to qualify for a home loan. Here's a number to keep in mind, per $100.00 in monthly minimum payments of consumer debt, a buyer loses $18,500 in purchasing power toward qualifying for a home loan. This number is based on a 5%, 30 year fixed rate. Consumer debt consists of credit cards, auto or lease loan payments, and various installment loans.
A first time homebuyer when qualifying for a real estate loan, may possibly have a $400.00 auto lease or loan and $350.00 in minimum card payments that is being paid monthly. The combined payments of $750.00 is equal to a loss of buying power of $140,000! If need be, I advise the applicant to zero in on paying off the highest payment credit line but not necessarily the credit card with the highest interest rate. When qualifying for a California real estate loan, it's all about minimizing your monthly payments to qualify.
I originate real estate loans, and I have go over consumer debts with homebuyers on a weekly basis and several times the prospective homebuyer has to do a bit of homework in the form of paying off debt to maximize their purchasing power and sometimes it means I may not see them again for 6 months or even a year until they're ready to buy. Every 45 days or so I do check up with them to see how they are doing on their debt reduction plan and to offer them moral support and garden furniture info (Cloti-aikou.net) keep them on track toward their goal.
If a relative has given them a gift of funds towards a down payment, we look at the numbers and I may advise the buyer to payoff debt with the funds instead of using toward the down payment. There's more bang for your buck by paying off the debt. A $10,000 gift going towards a down payment may bump your buying power by $10,000. Take that same $10,000 and payoff the $300.00 credit card payment that goes along with it and you increase the first time homebuyer's purchasing power by $55,500, again by using the same loan terms as mentioned above.
Maximizing qualifying power, by way of paying down debt, sounds simple but you would be surprised at how many first time homebuyers have not heard of or practice it. This concept needs to be applied early in the home buying process so that there isn't heartbreak down the road. When working together with a repeat homebuyer or first time homebuyer and watching them execute a debt reduction plan, and than having them come back a year or more later and be able to buy a home, is one of the most satisfying feelings a real estate loan originator will ever have.
