Purchasing a new home is the biggest investment of my life so it is essential to have a realistic idea of ‘how much house can I afford’ before entering negotiations or give sellers an offer to purchase. As a newbie home buyer, it is important to know what comfortable home value fits your budget and how can you avail affordable home mortgage loan. Remember, a mortgage lender considers several financial factors before sanctioning the potential buyer’s loan proposal. They evaluate the risk involved with the mortgage deal and check your ability to pay back a mortgage. The mortgage lenders take into account the buyer’s debt to income ratios, FICO credit score, employment duration, history of good debt management, bill payment history, and current financial obligations such as credit card debt, child support, student loans, auto loans, alimony, business expenses, etc. Read on to get a clear idea of the financial issues which actually matters while borrowing a mortgage loan.

Risk calculation by Home Mortgage Lenders

Maximum lenders generally compare GMI (gross monthly income) to total monthly home expenses or to home expenses plus over recurring debt. The traditional lending institutions are more stringent in their regulations and tend to stick to this rule whereas the more common FHA loans are a little more lenient and loosen mortgage restrictions if the individual has a good financial appearance.

Comparing Gross Monthly Income to Total Monthly Home Debt

A home buyer must sum up all sources of income including working income, rental income, dividends, pensions, and other reliable income prior tax deduction and divide them into 12 monthly values. Then find the total probable monthly home expenses which are the monthly mortgage for principal and interest, as well as total annual property taxes and hazard home insurance divided by 12 months. Now divide Total Monthly Home Debt by GMI. As a buyer your goal must be to keep the ratio at 28% or below, to evade creating higher obligations for the buyer and greater risk for the mortgage lender.

Comparing Gross Monthly Income to Total Recurring Monthly Debt

Add all the recurring debts that last longer than 6 months and require minimum payments to avoid penalties like car payments alimony, child support, student loans, business investments, etc). Then divide it by GMI (gross monthly income). This ratio should be less than 36% for traditional loans, or can possibly increase up to 41% with more lenient and popular FHA loans.

How long the buyer expects to be in the property

It is a crucial question that a mortgage lender asks to check the buyer’s financial planning for future. If the duration is less than 2-3 years, perhaps renting may be a more financially savvy option for you due to the expenses of real estate fees, closing costs, maintenance, landscaping. However if the buyer expects to have a large increase in salary and raising working hours perhaps an adjustable rate of mortgage can be available.

Down payment and closing cost

A buyer needs to determine the amount of down payment available, as most FHA loans require 3 percent to 5%, and conventional loans may need up to 10% depending on the approval process. Closing costs need to be added to the down payment to calculate the total amount at closing. Make sure the loan value is large enough to cover the remaining home expense after closing costs and down payment have been calculated into the situation.

Credit score

Credit score plays a substantial part in determining the interest rate on your loan and your mortgage pay therefore find ways to increase your credit score before applying for a loan. Pay all bills on time and stop opening new lines of credit. If possible, get a free credit report from each of the three major credit score organizations a year, and immediately rectify if any discrepancy found in your credit report.

To summarize, knowing how much you can afford to pay for your house will certainly help you to meet your future expenses.

Jenny Salomon, an artist, lives in a magnificent restored brownstone that often functions as a de facto exhibition space.

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Have you ever asked yourself whatA¢a‚¬a„¢s probably the biggest investment in my life? Your home or is it your home mortgage? Did you know these facts about your 30 year home mortgage? You end up paying back between 200% to 300% of the amount you originally borrowed to purchase your homeA¢a‚¬aEthat means if you borrow $200,000.00 to buy your home, youA¢a‚¬a„¢ll end up paying back between $400,000.00 and $600,000.00 at the end of your 30-year mortgage. If you’re presently in your 40s today, youA¢a‚¬a„¢ll be in your 70s when you pay off your 30-year mortgage. If you’re in your 30s today, you’ll be in your 60s before you pay off your 30-year mortgage. After paying your mortgage for ten years, youA¢a‚¬a„¢ll still owe nearly 80% of what you originally borrowed. Now, you maybe asking yourself? How much can a bi-weekly program help me? Typically a bi-weekly mortgage programs will eliminate up to five to seven or more years off of a 30-year mortgage. Imagine not having to make up to five years of payments! Imagine not having to make those 60 payments, 12 payments a year for five years equals 60 payments. Find out how much you can save. Visit biweeklymortgagetips.com to get a free bi-weekly mortgage calculator, receive a free bi-weekly mortgage guide to reclaiming your American dream where you own your home, not the bank, but you own your home free and clear and save up to five to seven years off of your mortgage. Get a free classified bi-weekly mortgage case scenario report and other free resources for free membership. Visit biweeklymortgagetips.com today.

Learn how to make a simple change to the way you make your monthly payment that can have an enormous impact on eliminating unnecessary interest. Completely eliminate up to seven or more years off of your mortgage. Eliminate PMI or Private Mortgage Insurance sooner. It eliminates sooner because you pay off your principal balance faster and learn how to become a mortgage savvy consumer and save up to 25% of the interest that you would normally pay on your 30-year mortgage otherwise. Get back in control of your mortgage and reclaim your American dream of true home ownership! Tilt the tables back in your favor, not your mortgage company, your favor for you and your family. Save unnecessary interest! Reclaim your American dream of true home ownership! Visit today for instant access to the biweeklymortgagetips.com members area. Reclaim your American dream of true home ownership!

New data suggest that foreclosures are rising in more expensive housing markets. About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new information from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006. The report shows that foreclosures, after dying earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. “The slope of that curve in recent months is much sharper than it was recently,” said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up. The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade. Foreclosures are rising in more expensive markets as home values in those areas fall, leaving more homeowners with mortgages that exceed the value of their properties.

Prime loans accounted for 58% of foreclosure starts in the second quarter, up from 44% endure year, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosure starts, down from one-half last year. The prime classification includes so-called exotic mortgages that were increasingly derived to buy more expensive homes, including interest-only mortgages that allowed borrowers to defer principal payments during an dawning period. Borrowers often aren’t able to refinance out of these products because the drop in household values has departed them with little equity in their homes. Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to dig out minimum payments that may not cover the interest due. Monthly payments can grow to sharply higher levels after five years or when the outstanding balance reaches a definite level. A study by Fitch Ratings discovered that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments. Zillow estimated that nearly one in four homes with mortgages was desirability less than the value of the home at the end of June. Mr. Humphries said he didn’t expect to view foreclosure volumes level off until later in 2010.

A new Columbia University satellite campus in Manhattanville is giving the neighborhood next door an extended turn in the limelight.

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Mortgage rates dropped yet again early last week, but then ended on a sour note as prices of mortgage backed securities fell steeply. The average rate on 30-year fixed mortgages fell further below 5%, according to the weekly survey issued by Freddie Mac. Losses on mortgage backed securities continued all the way into the close of the day, which forced banks to reissue higher mortgage rates. We do have some potentially market moving data being released this week which could help slow the pace of rising mortgage rates, mainly the Fannie/Freddie news releases late in the week.The 30-year fixed-rate mortgage averaged 4.87% for the week, which was the lowest since May. The average for the week prior was 4.94% and the year prior was 5.94%. Also, rates on 15-year fixed-rate mortgages were 4.33%, which is the lowest interest rate of it’s kind on record. But, how is this effecting the mortgage industry, and where are mortgage rates expected to go? In order to secure a mortgage in todays economic climate, the borrower generally must have 20% for a down payment and a FICO above 740. This limits the pool to a small percentage of borrowers eligible for optimal financing or refinancing. However, the falling rates have spurred an increase in refinancing activity, which reached a 19-week high last week. The number of U.S. mortgage applications fell last week with a 5 percent rise in interest rates on 30-year mortgages.

The Mortgage Bankers Association said rates on the most widely used loan, 30-year fixed mortgages, rose above 5 percent for the first time in a month after falling to a four-month low. Mortgage rates being below 5 percent is regarded as a psychological threshold, and has increased mortgage refinancing activity dramatically. Any positive statistic in the housing and mortgage industry has been attributed to low mortgage rates, high affordability and the federal government’s $8,000 tax credit for first-time home buyers. But this silver cloud has a grey lining. The stimulus inspired tax credit is soon to expire, and mortgage defaulted properties make up a large portion of home sales this year. So, any forward momentum in real estate and mortgage activity is not an indicator of the long-term outlook. Thomas Lawler, a housing economist, does not see the merit in extending the tax credit. “It is extremely expensive and the program does not directly impact the core issues facing the housing market, namely a weak jobs market and slow growth in household formation,” he said. To make matters worse, the American jobless rate in September hit a 26-year high at 9.8 percent. “The biggest cloud over the housing market right now is by far foreclosures and if it were not for that issue people should be feeling pretty good,” Lawler said. “People cannot look at the number of loans that are delinquent and not be worried.” The housing market, however, has shown some signs of stabilization. Home sales have begun to rise for the first time in over a year. And house price declines are leveling throughout the country, home prices in some areas have risen. Mortgage Rates are watched closely by those who regard them as the rudder to the real estate market.

Obama mortgage modification program is the most significant initiative of the government. It was designed with the aim, to help Americans save their homes. MHA (Mortgage Home Affordable) provides the opportunity to the home owners to get their loan modified. The borrowers counted on selling off their home due to the prevailing economic situation in the country. Although the property prices would continuously increase but the buyers would vie the property. In such a situation MHA helped the borrowers by offering mortgage loan refinance option.

Most of the home owners, under financial difficult situation, want to keep their home. To do so, they would need help. Theloan modification companies can help to get the loan modified according to one’s requirements. To begin with, one should inquire about the reductions that can be done in the principal amount. However, one can save almost equally, with the reduction in the interest rate.

Obama’s governmentloan modification program, is greatly helping the Americans to save their homes. It supports the home owners to modify their loans and avoid foreclosure. Under the head of this new program, the borrowers would not spend more than 38% of their income to fix the new affordable monthly payments, during loan modification. Due to this a number of knock off have been saved.

With the current financial situation, people land up with less disposable income, the staff has to be scaled down. Hence the borrowers have to depend on some financial assistance that can be availed from some lending institute. As a result of several government policies that have been recently introduced, the process of automatic foreclosure is no more in action. Besideshome loan modification, there are several grants and funds that are made available by the government to the borrowers. The government has offered new grant of $75 billion.

Manhattan, NY, United States (AHN) – The New York prosecutor subpoenaed American bank Goldman Sachs to investigate the institution’s role into the credit crisis.

The court summons is in relation to the U.S. Senate Permanent Subcommittee on Investigation’s report that accused Goldman Sachs of misleading buyers of mortgage-linked investments as one of the reasons behind the collapse of the financial markets.

Reports said that Manhattan District Attorney Cyrus Vance Jr. is studying the possibility of initiating civil proceedings against Goldman Sachs on the basis of the subcommittee’s report. But any case that Vance could file would not lead to the filing of criminal charges against the bank or its employees.

Goldman Sachs declined to comment on specific regulatory or legal issues, but said receiving subpoenas are a normal part of the judicial system’s information request process. The bank promised to cooperate fully with the ongoing investigation.

Shares of Goldman Sachs dropped 16 percent in New York trading since the subcommittee report was released in April. On Thursday, the bank’s stocks went down 1.3 percent to $134.38 at the New York Stock Exchange composite trading.

In 2010 Goldman Sachs was penalized by the U.S. Securities and Exchange Commission over claims related to the bank’s marketing of complex securities known as collateralized debt obligations. The settlement was over claims that Goldman Sachs did not disclosed that hedge fund Paulson & Company was betting against and influenced the selection of CDOs that the bank was packaging and selling.

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A new report from bank regulators shows that banks are starting to lower the principal amounts due on home loans for some struggling borrowers, a practice known as a Loan Modification. Banks believe that by taking the hit now they can improve their chances of being repaid. Over the next few years banks and other lenders will be wading through thousands of mortgage modification applications. The approval rate of loan modifications in the second quarter of 2009 was 10%, which is a 7% jump from the first quarter, based on a Office of the Comptroller of the Currency Report. Lenders now have the capital to justify loan modifications because of their balance sheets have stabilized with an influx of federal cash. The Obama administration announced plans to help underwater homeowners in March. The plans include financial incentives for mortgage-servicing firms that modify loans. But, the plan involved giving billions of dollars to troubled banks with very few strings attached. Ultimately it has taken until now for the lenders to use the government hand-out as a justification to modify mortgages.Obama’s critics say that banks should have never underwritten loans on a stated income basis, and that many home buyers should have known that the homes were beyond their means. Obama’s plan has been criticized because many see it as using tax dollars to ultimately bail out these two irresponsible parties.

Almost a half million loan modifications were recorded in the second quarter of this year, and 10% of those involved reducing the principal. Even with this help, some homeowners are beyond help. This is often a sign that the loan was irresponsibly approved and processed. A whopping 28% of the mortgages modified in the first quarter of 2008 were in default again within three months. Also, of the loans modified in the second quarter of 2008, 56% were in default again a year later. The most common tactics in loan modifications have been to either reduce interest rates or extend the term of the home mortgage. These methods help homeowners without requiring lenders to reduce the principal owed. The last resort for any bank is to write off a portion of the loan altogether, but this is happening in about ten percent of cases. Lenders first try to modify mortgages by lowering the interest rate for qualifying borrowers. If that doesn’t lower the payment enough then the bank may extend the term of the loan, which will lower the monthly payment even more. Despite of the mortgage modification efforts of lenders, foreclosures still continue to rise. In a report last week, an estimated 12% of U.S. homes with mortgages will be in foreclosure over the next few years. The report said that mortgage modification efforts are not expected to significantly ease the problem, mostly because so many homeowners default again. Because of the rate of defaults after a loan modification, many say that federal involvement is just slowing the inevitable. In the end, all of the irresponsible lending and borrowing would have fixed itself quicker without government resources.

Many celebrities trying to keep their home purchases quiet buy under the cover of trusts and limited liability companies.

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