Home buying 101
- Home buying guide
- Mortgage Basics
- Virtual Homebuyers Seminars
Should I buy or continue to rent?
When deciding whether now is the right time to buy, two key things to consider are stability and cost. When purchasing a home, it’s important to have a stable source of income that will remain steady throughout the life of your loan. With that being said, buying a home has the potential to save you a considerable amount of money in the long run. As rents continue to rise, a consistent mortgage payment may prove to be more manageable than renting. Homeownership also carries benefits that are not purely financial. Many people view homeownership as a major accomplishment and enjoy the feeling that they are part of a larger community.
How much can I afford?
Figuring out how much to spend on a house can be tricky. Generally speaking, your monthly housing expenses and other debt should be no more than 43% of your monthly gross income, but monthly income and debt can often be misinterpreted. The best way to find out how much you can afford is to sit down with a mortgage consultant and discuss your finances together.
Why are home inspections Important?
Buying a home is the biggest financial decision of your life. Think of the home inspection as a sort of “investment reality check”: an independent opinion that will help you make a smart decision.
During your home inspection, an objective, third-party inspector will assess the condition of the home that is being sold. He or she will give you a detailed report so you can make an informed decision about the purchase you are about to make. Finding a home inspector with architectural or engineering experience is highly encouraged. Two main questions to answer during an inspection are:
1) Is the home structurally sound?
2) Is it electrically safe?
Keep in mind the list of things that can adversely affect the value of a property is long. During the inspection, walk through the home with your inspector. Keep your eyes wide open, ask questions, and listen carefully.
What should I be doing to get ready?
If you are getting ready to buy a home, you should start organizing the financial paperwork you’ll need to make the purchase. We’ve put together a mortgage checklist that details what you will need.
How does the mortgage application process work?
The mortgage process can seem intimidating, but at Ridgewood Savings Bank, we make it easy. To help you understand the in's and out's of applying for a mortgage, we’ve put together several resources for your convenience. Our multimedia website, JoyOfHomeOwnership.com, gives two-minute-video answers to common mortgage questions. If you like reading, we’ve also put together a mortgage checklist that details what you will need during the mortgage process.
Debt-to-Income Ratio (DTI): Your DTI is determined based on the percentage of your gross income that goes toward paying debts. Based on the type of home loan you're applying for, it may be necessary to prove that your DTI is within certain acceptable limits.
For example, if the loan you're applying for requires a DTI of 41/43, this is how a lender will calculate acceptable expense levels.
Gross Income: $50,000
$50,000 x .28 = $14,000 allowed for housing expense.
$50,000 x .36 = $18,000 allowed for housing expense plus recurring debt.
Loan to Value (LTV): A Loan-To-Value Ratio, also referred to as LTV Ratio, is a comparison between your loan amount and the value of your home. To determine your LTV, your lender will divide your loan amount by the lesser of the home's appraised value or purchase price (if applicable).
Monthly Mortgage Payment: There are typically four parts to a monthly mortgage payment, often referred to as PITI. The four parts are as follows:
Principal: This is the portion of a monthly payment that goes toward paying back the amount of money borrowed for the purchase or refinance of a home.
Interest: This is the portion of a monthly payment that goes toward paying the interest on the money you borrowed.
Taxes: Most lenders require an escrow account for the collection of property taxes. Taxes are collected monthly and placed in escrow until they become due at tax time.
Insurance: It is common to pay for a year of homeowners insurance when closing on a home. After the first year, payments start the first month.
Interest Rate: A loan's interest rate is the rate at which interest is paid by borrowers to lenders. In particular, the interest rate is a percentage of the principal that is paid a determinate number of times throughout the life of the loan.
Annual Percentage Rate (APR): APR is the interest rate of a loan expressed as an annual rate rather than as a monthly percentage or fee.
Points: A point, sometimes called a discount point, is a form of prepaid interest on a mortgage. Each point is equal to one percent of the loan amount and is a one time fee. Borrowers can choose to pay points as a way to reduce their interest rate and monthly payment.
Amortization: Amortization is the term used to describe the repayment of a loan over time. For each payment made toward a mortgage, a portion will go toward paying down the principal of the loan and a portion will go toward the interest that is due. Amortization refers to the payment of all costs associated with the loan including principal, interest and any other pertinent fees.
With terms like escrow, PMI and amortization, buying a home can feel like learning a whole new language. Luckily, at Ridgewood Savings Bank, we speak mortgage. Our experienced lenders have helped thousands of New Yorkers become homeowners, and we can help you too.
During this seminar, you'll learn:
- The mortgage terms all homebuyers need to know
- How the mortgage process works
- How to find the mortgage that's right for you
- How to figure out how much home you can afford
- What you should be doing now to get ready to buy
You'll leave this seminar with information to help you take advantage of today's record-low interest rates and achieve your dream of homeownership.
There are currently no seminars scheduled. Please check back for future seminars.