Commonly referred to as DTI, your debt-to-income ratio tells lenders what % of your income you have available for a house payment after fulfilling your other recurring obligations each month.
Recurring debt includes credit card payments, child support payments, car payments and other obligations that will not be paid off within 10 months (for conventional loans).
Lenders prefer that this number is not more than 36%, but depending on the strength of your loan application your number might be higher or lower.
To calculate the DTI ratio, take your total gross annual income and divide it by 12 to get your gross monthly income. Then add up all of your recurring debts including your house payment. Then divide your gross monthly income by this number and you will have your DTI ratio.
If your ratio is higher than 36%, then it may mean you are stretching your income too far. In addition, too much revolving debt can drive down your credit scores.
Thursday, May 24, 2007
Improving your home’s curb appeal
What is the charm factor of my house? When it comes time to sell, most homeowners’ concerns turn to “curb appeal.” A new welcome mat just isn’t enough anymore. Competition among sellers is fierce so the goal is to make your home so attractive from the roadway that all who pass will want to see the inside.
I suggest that my clients perform this curb appeal test. On your way home, stop the car in the roadway and try to see your home with an objective eye. Ask yourself these questions:
1. What is the first impression of my house and the property? Does it look cluttered or too bare?
2. What is the best exterior attribute of the house or the lot? How can I enhance that?
3. What is the most unflattering feature of the home or lot? What can be done to fix it, remove it, remodel it, add to it or hide it?
Then park the car where a potential buyer would and walk towards the house noticing if the approach is clean and tidy or what improvements are needed.
Don’t forget about evening curb appeal too. One quick way to improve nighttime curb appeal is with lighting. Pathway lighting along sidewalks or the driveway can make a dramatic difference, as well as replacing front porch and garage lights with updated fixtures.
To grow your home’s curb appeal I suggest giving your front door a little attention. The door can be repainted (along with matching shutters), replaced with a new and more attractive door or perhaps the addition of a quality storm door is the perfect finishing touch. Then top off the transformation with a welcoming seasonal wreath.
Be sure to get rid of all mold or mildew on the house and roof, find a hidden place for all gardening items and tools, rake and dispose of fallen leaves, clean windows and gutters, and trim tree limbs that hang near or touch the roof.
Many sellers turn to landscaping when an outdoor spruce-up is needed. Be careful not to overwhelm the property and the potential buyers with obscure, high-maintenance plants. Predicting the weather, especially in St. Charles, is an inexact science so be careful not to lose money and plants to an unexpected cold snap. Colorful hanging flower pots spaced evenly along the front porch can add life to a white house. If you have always considered adding a water feature or an architectural element to the garden go ahead and do it. These projects can be inexpensive and enjoyable for the do-it-yourselfer and will at the very least make the house stand out among other homes. “I’d like to go back and see the house with the waterfall.”
Other easy projects that are sure to raise your home’s charm factor are to replace the beat-up mailbox with a brightly colored or ornamental iron mailbox, install awnings, paint and stencil a wooden porch floor, add ceiling fans to a roomy front porch, or simply add a flag stand to display “Old Glory.”
I suggest that my clients perform this curb appeal test. On your way home, stop the car in the roadway and try to see your home with an objective eye. Ask yourself these questions:
1. What is the first impression of my house and the property? Does it look cluttered or too bare?
2. What is the best exterior attribute of the house or the lot? How can I enhance that?
3. What is the most unflattering feature of the home or lot? What can be done to fix it, remove it, remodel it, add to it or hide it?
Then park the car where a potential buyer would and walk towards the house noticing if the approach is clean and tidy or what improvements are needed.
Don’t forget about evening curb appeal too. One quick way to improve nighttime curb appeal is with lighting. Pathway lighting along sidewalks or the driveway can make a dramatic difference, as well as replacing front porch and garage lights with updated fixtures.
To grow your home’s curb appeal I suggest giving your front door a little attention. The door can be repainted (along with matching shutters), replaced with a new and more attractive door or perhaps the addition of a quality storm door is the perfect finishing touch. Then top off the transformation with a welcoming seasonal wreath.
Be sure to get rid of all mold or mildew on the house and roof, find a hidden place for all gardening items and tools, rake and dispose of fallen leaves, clean windows and gutters, and trim tree limbs that hang near or touch the roof.
Many sellers turn to landscaping when an outdoor spruce-up is needed. Be careful not to overwhelm the property and the potential buyers with obscure, high-maintenance plants. Predicting the weather, especially in St. Charles, is an inexact science so be careful not to lose money and plants to an unexpected cold snap. Colorful hanging flower pots spaced evenly along the front porch can add life to a white house. If you have always considered adding a water feature or an architectural element to the garden go ahead and do it. These projects can be inexpensive and enjoyable for the do-it-yourselfer and will at the very least make the house stand out among other homes. “I’d like to go back and see the house with the waterfall.”
Other easy projects that are sure to raise your home’s charm factor are to replace the beat-up mailbox with a brightly colored or ornamental iron mailbox, install awnings, paint and stencil a wooden porch floor, add ceiling fans to a roomy front porch, or simply add a flag stand to display “Old Glory.”
Tuesday, May 1, 2007
Do you know your housing ratio?
This is very beneficial information to have when deciding how much to spend on a new house or determining whether to refinance. This is also one of the many factors that lenders review when deciding whether or not to lend you money.
Your housing ratio simply measures the amount of your income that you spend on a house payment(s). To calculate the housing ratio, take your total gross annual income and divide it by 12 to get your gross monthly income. Then divide that number by your total house payment. Make sure you include taxes, insurance and any 2nd mortgage payments.
Fannie Mae recommends that you don’t spend more than 28% of your gross monthly income on a house payment. Again, this is a rule of thumb and there are many other factors that a lender takes into consideration including how much you spend on other debt per month and your credit scores before determining whether you are qualified for a loan.
But in general it is a good ideal to not go much higher than 28%. Studies have shown the higher the housing ratio is; the harder it can be for people to make their payments on time.
Your housing ratio simply measures the amount of your income that you spend on a house payment(s). To calculate the housing ratio, take your total gross annual income and divide it by 12 to get your gross monthly income. Then divide that number by your total house payment. Make sure you include taxes, insurance and any 2nd mortgage payments.
Fannie Mae recommends that you don’t spend more than 28% of your gross monthly income on a house payment. Again, this is a rule of thumb and there are many other factors that a lender takes into consideration including how much you spend on other debt per month and your credit scores before determining whether you are qualified for a loan.
But in general it is a good ideal to not go much higher than 28%. Studies have shown the higher the housing ratio is; the harder it can be for people to make their payments on time.
Sellers – Choose the right upgrades and get better bang for your buck
Your home is your sanctuary and when it comes time to sell, you want someone else to think of it as their sanctuary too. So how do you make your home stand out among all the new construction homes available? It is all in the upgrades.
To prepare your home for sale, the tricky part is deciding where to begin. This is where your real estate agent comes in.
Too many times I have witnessed well-meaning sellers make improvements to their home which are not appealing to the masses. My clients use my complimentary home inspection for an early glimpse as to what buyers may want repaired or improved.
Heating and cooling efficiency items are becoming more common upgrades in the St. Charles area. Homeowners are spending the extra $150 for this perk. I am also starting to hear more about solar alternatives as an amenity.
Many people believe the bathroom is the place to start upgrading. Sellers can turn a dated bath into a luxurious haven by installing a jet tub, a double bowl vanity or pedestal sinks.
An inexpensive way to upgrade any room is with improved lighting. But a great impact can be made in a bathroom with the addition of new vanity lights, a shower recessed light, or a skylight. A major bathroom remodel provides a great return on investment when the house is sold.
The kitchen is the heart of the home for most buyers. Granite countertops and stainless steel appliances are “in” and that may be all it takes to bring a kitchen into the 21st century. However, a blast-from-the-past kitchen in need of a significant overhaul will be worth the investment when the house sells.
Sellers should not forget to consider the outside of their home when contemplating improvements. The addition of a deck is the most economical way to add square footage to a home and usually brings a significant return on your investment.
The top 10 remodeling projects with the highest return on investment (ROI) according to REALTOR magazine are:
10. Sunroom Addition
9. Roof Replacement
8. Family Room Addition
7. Deck Addition
6. Basement Remodel
5. Attic Bedroom Remodel (adding an extra bedroom)
4. Moderate Kitchen Remodel
3. Bathroom Remodel
2. Siding Replacement
And the number one remodeling project with the highest return for sellers is window replacements.
Minor touchups can also be invaluable for sellers. Nothing says (or smells) of an upgrade like freshly painted walls. Other worthwhile minor fixes include: installing new ceiling fans, pressure washing the house and sidewalks, installing closet organizers, repairing all cracks in walls and ceilings, among others.Make sure your chosen contractor follows all the current county building codes and applies for the necessary permits. Saving the $50 and skipping the permit process will only come back to haunt you when your house goes on the market.
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