Since most people finance their home purchases, buying a home usually involves applying for a mortgage. Here is some basic information to help guide you through the process.
Years ago, the general rule of thumb was that you could afford a house that cost two and a half times your annual salary. Today, most people finance their home purchases. As a result, determining how much house you can afford generally equates to how large a mortgage you qualify for and how much of a down payment you will make.
To determine how large a mortgage you qualify for, lenders use formulas known as qualifying ratios. Generally, these qualifying ratios are based on your gross monthly income, your housing expenses, and your long-term debt. To qualify for a conventional mortgage, your housing expenses should generally not exceed 28 percent of your gross monthly income. Your monthly housing expenses include mortgage principal, interest, taxes, and insurance (often referred to as PITI). In addition, the Consumer Financial Protection Bureau’s mortgage rules suggest that borrowers have a debt-to-income ratio that is less than or equal to 43 percent. That means that you should be spending no more than 43 percent of your gross monthly income on longer-term debt payments.
When shopping around for a mortgage, compare the mortgage rates and terms that various lenders offer, and then get preapproved or prequalified with the lender of your choice. That way, you’ll know exactly how much you can afford before you begin searching for a house.
Life insurance has come a long way since the days when it was known as burial insurance and used mainly to pay for funeral expenses. Today, life insurance is a crucial part of many estate plans. You can use it to leave much-needed income to your survivors, provide for your children’s education, pay off your mortgage, and simplify the transfer of assets. Life insurance can also be used to replace wealth lost due to the expenses and taxes that may follow your death, and to make gifts to charity at relatively little cost to you.
If you care about what happens to your money, home, and other property after you die, you need to do some estate planning. There are many tools you can use to achieve your estate planning goals, but a will is probably the most vital. Even if you’re young or your estate is modest, you should always have a legally valid and up-to-date will. This is especially important if you have minor children because, in many states, your will is the only legal way you can name a guardian for them. Although a will doesn’t have to be drafted by an attorney to be valid, seeking an attorney’s help can ensure that your will accomplishes what you intend.
Purchasing a home is an exciting and rewarding experience. Having a place to call home is the ultimate dream for many Americans. However, the process of buying a home can be stressful, especially if this is your first time. Fortunately, knowing what to expect can make it a lot easier.
Why is estate planning so critical? Because, at your death, you leave behind the people you love and all your worldly goods.
In times of financial crisis, the last thing you’ll want to do is start digging through the couch cushions for coins. Especially if you have a family. Having a financial safety net in place can ensure that you’re protected when a financial emergency arises. One way to accomplish this is by setting up a cash reserve, a pool of readily available funds that can help you meet emergency or highly urgent short-term needs. Here’s how to get one started.
A record-keeping system is a systematic approach to retaining and filing documents in a way that makes them easy to find when needed, even if it’s several years later. Record-keeping systems range from simple to elaborate and from basic to comprehensive. The ideal system is designed to fit your personal and family situation and lifestyle.