What You Do and Don’t Need to Buy a Home

Mortgage Loan Austin MortgagePurchasing a new home is a huge event in anyone’s life. Many Americans think about buying themselves a fresh abode at some point only to decide they “don’t have what they need” to finish the job. Many of those people are absolutely right — but a surprising few are actually perfectly equipped to buy a new home and just don’t know it.

What You Do Need

As you might expect, the number one thing you need to buy a new home is financing. If you don’t have the cash on hand (and who does?), you’ll need to get yourself either a construction loan — to build a new home — or a mortgage, to purchase an existing home. Both of these financial instruments are ‘necessary evils’, and each has their own requirements that you’ll have to meet before you can qualify for either.

For example, on a mortgage, you’ll have to meet both the debt-to-income (DTI) and loan-to-value (LTV) ratio requirements. DTI indicates the ratio of your income to the monthly payments of all your debts. In general, you must be able to pay off all of your various debts with no more than 36% of your income — and pay off just your mortgage with no more than 28% of your income — in order to make the DTI qualification.

LTV is the ratio of your loan to the actual value of your home– for example, if you take out a loan of $30,000 to buy a $50,000 home, your LTV is 60%; you’re taking out a loan that’s worth 60% of the total value of the home. Most lenders are very reluctant to hand out loans with LTVs above 80%.

What You Don’t Need

You don’t need a real-estate lawyer unless you’re buying a house for the sole purpose of renting it out. There are a few lucky people out there who have the contacts to make a back-room purchase. If it is someone you trust, go for it. However in most cases it is best to go find a reliable real estate agent to guide you through the process.

Buying a home is no small business — knowing what you need and what you don’t before you start is half the battle.
This post was provided by Realty Austin, experts in downtown Austin condos and Lake Austin homes!

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