FINANCING / MORTGAGE

How much can you afford?

1. Lenders often use the 28/36 method of qualifying buyers

The monthly payment cannot exceed 28% of your monthly income, and the total of all debt payments is limited to 36% of income.

2. The lender percentages are usually maximums

Not everyone can afford the largest home they qualify for. You need to look carefully at your expenses and lifestyle to see whether you can and are willing to pay the maximum month after month. Families with high medical expenses, auto repair bills or educational costs, for example, may decide to take out a smaller mortgage rather than borrow the most they can.

3. Ask us or a lender what the monthly principal and interest payment would be for the loan maount you qualify for at the prevailing interest rate

Add in the monthly amounts for property taxes, homeowners insurance and homeowner association dues, if any. Estimate utility, credit-card and car payments. Add all these items to the monthly mortgage to get your total fixed expenses. Also figure in some routine maintenance costs. Subtract the total from your monthly income to get an idea of how much discretionary spending money you will have left at the end of the month in your new home.

4. Don’t put all your money into the new home

Plan to have several months’ worth of income in a savings account for emergencies after you pay closing costs. Also, allow for new-home start-up costs such as new furniture and draperies, paint and wallpaper, new tools and equipment, etc.

5. Look into the crystal ball

If you foresee a loss of income or a growth in family size, you may want to be more conservative in the amount you spend on your first home. On the other hand, if you expect your income to rise, enabling you to reach a comfort level after stretching your budget for a year or two, you may want to borrow the maximum.

6. Consider moving up to a bigger home in steps, rather than all at once

After considering all the figures, you may decide to move into your first home, now, even if it is not your dream home. In a few years, your dream home may be within a comfortable reach.

Buyers Planning Guide

The table below shows how much 28% is at various income levels

Buying Your New Home

You’ve decided to start fresh and purchase a new home. This is a very exciting time for you and we look forward to guiding you smoothly through this process, helping you to efficiently find the home of your dreams.

As you will see, there are several steps you need to take before you move into your new home. The Caribbean Island Properties HomeBuyer Guide is designed to inform you of your rights as a homebuyer and to introduce you to the world of real estate. When using a Caribbean Island Properties representative, you will feel confident your search for a new home will be very successful.

Mortgaging

Before you can begin to search for a new home, you need to determine your budget and estimate how much you can afford. One of the most important factors in figuring out your financial budget is getting pre approved for a mortgage.

What is a Mortgage?

The first step towards financing a new home is getting pre-approved for a mortgage. A mortgage is an advance of money from your lender that will cover the finances of your new property. Over an extended period of time, you (the mortgagee) must pay the bank back each month a percentage of the money they lent you plus interest, until the total sum is paid in full. This is how most homes are financed.

Documents Needed

When you apply for a mortgage, you will need to furnish information regarding your income, expenses and obligations. To save time, have the following items available for each borrower:

• Two most recent pay slips
• Last two months’ bank statements
• Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)
• Repairing Credit Problems and Establishing Good Credit

At one time or another, most people have put blemishes on their credit reports. If your credit report is tarnished, here are a few suggestions you can do to repair the damage.

Examine the credit report thoroughly and make sure it’s accurate. If there are mistakes on the report, contact the credit report agency and ask them to remove the mistakes immediately.

Here are some other helpful tips:

Begin to pay your bills on time and in full

Only use two to four credit cards so that you can keep track of them and do not spend more than your budget

Keep a separate checking and savings account

Hold on to the same job for a few years, the longer you stay put, the better Now that you’ve examined your credit report and are confident that you’re in good shape, you’re ready to choose between getting pre-approved for a mortgage or pre-qualified for a mortgage. Here’s the difference:

Pre-approval uses basic information as well as credit reporting to determine whether a lender will loan you money. If you are pre-approved for a mortgage, the lender has given you a commitment to support your new purchase.

Pre-qualification is not a mortgage approval but simply an estimate of what you can afford. When you pre-qualify for a mortgage, the lender also collects basic information regarding your income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount. The lender has not yet committed to supporting your financial needs and, therefore, you have not received an actual guarantee of funds.

People who are pre-approved for a mortgage are more attractive candidates to the seller and have a better chance of getting the property when they make an offer. Of course, a lender will only lend you money if they’re sure your credit is strong and they’re confident you have the ability to pay them back. A bank checks your credit by studying your financial history, income, pay slips, and long-term debt information (such as credit cards, auto loans, child support, etc.) to determine if you are a good candidate for a loan. If your credit report is good, then you have an excellent chance of obtaining a mortgage. If not, then you must take the appropriate steps to improve your credit rating.

Getting Approved Deciding Of course, a lender will only lend you money if they’re sure your credit is strong and they’re confident you have the ability to pay them back. A bank checks your credit by studying your financial history, income, pay slips, and long-term debt information (such as credit cards, auto loans, child support, etc.) to determine if you are a good candidate for a loan. If your credit report is good, then you have an excellent chance of obtaining a mortgage. If not, then you must take the appropriate steps to improve your credit rating.

About Caribbean Island Properties With considerable personal and professional experience in buying and selling homes and properties both here in Barbados and overseas we at CIP are ready and able to answer your questions and to help guide you through the process of borrowing money to buy your own home. Give us a call on 246 424 6633.

You’ve found the home you want, now how much should you offer to pay for it? This can be a tricky puzzle, because there are no carved-in-stone guidelines. Some homes are overpriced, while others are a “real steal” at the full asking price.

Here are some tips:

Ask your agent for comparables

To determine a fair purchase offer, ask your agent to prepare a written comparative market analysis showing the sales prices of similar neighborhood homes that sold recently and the asking prices of comparable homes currently on the market.

Compare the details

To calculate your best offer, compare the features of the home that interests you with the features of similar homes that have sold recently in the same neighborhood.