Light at The End of The Tunnel

We have all heard the bad news. The real estate market is suffering. More than two million adjustable rate mortgages (ARMs) are to reset at much higher rates in coming months, worsening the housing market.
The mortgage crisis rippled into the nation's economy and the average price of a home is on a decline.
Foreclosures are at a record high and will only worsen. It is a sad state of affairs.

Based on that news, it has many people worried. The national news we hear may not be reporting what is actually happening in your area or how it is affecting the state you live in. You may have noticed the interest rates have come down, which will allow more interest in home buying, but do you know what is happening in or around your local area?

I came across a blog that points to 'light' shining on the real estate market. Are we just hearing all the bad news and the good news is being left out of the reporting? I believe sometimes that is true. It seems the bad press surrounding Cincinnati Real Estate is not exactly true. The stats for this area are showing:

* Buyers' or Sellers' Market: About 50-50
* Average Time on Market: 60-90 days
* Market Trend: No Change
* Compared to last year: Up 0-5%
*Only 5% of homeowners have a non-prime or sub-prime borrower with adjustable rate mortgages

Those are pretty good stats. When you have an experienced professional reporting information in your area, you can rest a little bit easier when looking into buying or selling a home. I found that Amy B believes it is her job to inform and educate the people in her area. This is one realtor that loves what she does and it is projected in her performance and services she offers. Her blog, provides motivation and information regarding her local real estate market.

I found http://www.amybsells.com to be a very professional and easy to navigate site, which offers a grand list of resources available. One of the services she offers provides Home Staging. That is key for a home seller. She plunges in immediately with her marketing and creates a custom plan appropriate for each client.

Using MLS, Internet Marketing, upgraded advertisement, virtual tours, electronic lock boxes for safety, incentives for the seller/buyer, I'd say she goes above and beyond her call of duty. The team working with her strives to provide a smooth transaction. She wants her clients to feel supported, so she offers herself 24/7.

More real estate professionals should take the time to educate as Amy is, while providing services which will allow buyers and/or sellers to be successful.

Be sure to stay informed on what is happening in the market surrounding your area.

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Is Your Mortgage Resetting?

About $50 billion in adjustable mortgages are resetting this month. The interest rates will be going up for many borrowers.

What can borrowers do at this time? Most will have to find a way to pay the higher expenses, but are they prepared for this? Many are not even aware of how much their new payment will be.

If you have an ARM mortgage, you should be concerned and become aware of your options. Mortgages that will default will be at an all time high. A loan modification can be helpful and an option before going into default. Seek the help of your lender. Inquire about refinancing to a fixed rate.

Should the blame be put on poor underwriting standards? The subprime crisis came to a head in July and August of this year. By March 2008, there could be $100 billion in resetting loans.

I have read that servicers might give ARM borrowers an extra three to five years of payments at low rates, giving them the help they need until home prices rebound. Unpaid interest could then be rolled back into principals and loans refinanced.

Become aware of your mortgage terms, learn how your mortgage resets and become aware of all your options. Get yourself prepared, so you are not caught in a situation that you will default.

Definitions of Mortgage Terms and Mortgage Loans

Purchasing your first home can be an overwhelming experience. This is the biggest investment you will make and a huge financial commitment.

Once you find the perfect home for you, you will then need to find a mortgage loan. With so many options out there, do you know which loan is right for you?

Is there such a thing as cheap mortgages? It would certainly be in your best interest to take some time and compare mortgages. There are many ways you can search for the mortgage that best suits your needs. Check with your realtor, your attorney, use the Internet, ask your friends or relatives. I have included a mortgage rate widget on the sidebar of this blog,so you can see the latest interest rates for various types of loans.

Understanding mortgage terms and loan types can make this process easier for you:

Fixed Rate Mortgage: (10,15, 20, 40 or 50 yrs)
The interest rate and monthly payment remain the same over the entire life of the loan

10/1 year Adjustable:
The interest rate and monthly payment will remain the same for 10 years. At the beginning of the 11th year, the interest rate will adjust and the payment may change every year for the remainder of the loan

7/1 Adjustable:
Same as the 10/1 year Adjustable, but this mortgage will adjust beginning in the 8th year

Having an adjustable mortgage allows you to enjoy the initial lowest interest possible and the lower payment, but if you want the stability of a 'fixed' payment, this will force you to refinance (also described as remortgages the loan)

5 or 7 Year Balloon:
The interest and monthly payment will remain the same for 7 years, but at the end of that 5th or 7th year, the borrower must refinance into a new loan at the current interest rate.


Amortization Schedule- A month-by-month breakdown of principle and
interest to be paid on a note, as well as the balance after payment is made.

Balloon Payment- A lump sum payment that pays off a note in full.

Debt Ratio- An individual's total debt to relation to their income.

Equity--The difference between what a property is worth and how much is owed on it.

Loan to Value- Referred to as LTV. This is the ratio of the loan amount to
the value of the property.

Mortgagee- The person or investor who receives the payments from a
mortgage.

Mortgagor- The person who owes money (makes payment) on a mortgage.

Title Insurance- Insures that a piece of property is free and clear of any
liens

House Hunting Pro or Real Estate Bait?

Are you ready to make the biggest purchase and investment of your life? I am talking about buying your first home. The Real Estate market can be confusing and you may feel overwhelmed. My advice is to learn as much as you can from as many people, articles etc. as you can. The more knowledge you have, the better your experience will be.

Are you a house hunting pro or real estate bait?

Take this fun and easy quiz brought to you by Fine Living

Go to quiz here

Tips if Your Mortgage is Resetting ~ If You Are Refinancing or Just Trying to Get a Loan

Owner Financing: Selling a Home Without a Down Payment

I have been asked many questions with regard to selling a home and offering Owner Financing. As previously indicated, I will answer the questions I receive in posts as a way to help other home owners.

Answering John's Question:

Selling a home without a Down Payment

John asks...."I am selling my home and offering Owner Financing, but having trouble finding a good candidate with a good down payment. Should I take a chance and allow a buyer to put no money down?"

My advice to John is that it is never a good idea to sell a home without a down payment. You want the buyer to invest some of their own money into the home. If they have their own money involved they are more likely to take care of the home, keep up with maintenance, pay the bills associated with home ownership.You want the potential buyer to show some commitment to the home.

How many times have you come across a rental property only to see it run down? That renter had no equity in the home, they weren't loosing any of their own money, therefore might not care about the property. What are they loosing? They can walk away and find another place to live....

If you intend on selling this mortgage note down the road, you want the buyer to have some equity in the home from the start. The more equity your buyer has, a contract buyer is more likely to purchase the note.

Example:
A home is selling for $100,000 and the potential buyer can put down $20,000. This buyer is already starting with a 20% equity position. A contract buyer likes to see that.

You might also suggest that a potential buyer secure a personal loan for the down payment. Do they have a credit union or can they borrow against their 401 ? In some cases, you can receive a hardship withdrawal for the down payment towards home purchase and not have to pay the sum withdrawn back. Maybe they can be approved for a lesser amount from the bank or receive a loan from a relative. They then give you the money for the down payment. This option gives you the cash down payment, the buyer has the commitment to the home and a contract buyer will see equity.

Before making any final decisions, please make sure you have a good real estate lawyer to help you. Protect yourself.

7 Secrets for First-Time Homebuyers

1.) Visit a certified housing counselor at a nonprofit organization.
Housing counselors credentialed through a nonprofit agency provide objective advice and unbiased recommendations.

2.) Get your finances in order.
Find out what your credit report and credit score are and correct any inaccuracies. Lenders look at factors called the four Cs of credit: credit history (timely bill paying), capital (money available for a down payment), capacity (income versus debt), and collateral (the value and condition of the house).

3.) Look for down-payment and closing-cost assistance programs. Some nonprofit organizations and state or local government agencies can help you with down payment and closing costs through grant money or low-interest loans.

4.) Make sure homeownership fits with your lifestyle.
If you will be in a particular community for less than three years, if the local economy is not doing well, if unemployment is rising, or if your future income will not provide you with enough for mortgage payments and other financial responsibilities in owning a home, then renting may provide the better option.
Shop around for everything related to your home purchase.

5.) Follow the “rule of threes” by comparing at least three products, professionals or services before making your final selections.

6.) Get pre-approved for financing before shopping for a home.
Pre-approval is different from pre-qualification, which refers to when a lender calculates how much mortgage you likely can afford based on unverified information. A preapproval is a guarantee that the lender will loan you a fixed amount of money, as long as the property appraises over the amount for which you are qualified and you buy within a certain time period.

7.) Carefully select a location.
Research area schools, property tax rates, insurance rates, and crime statistics. Spend time thinking about things that may be important.

You can use this calculator to determine how much you can afford to spend on a home. However, many additional factors play a part in the loan qualification process.
www.ginniemae.gov

Programs sponsored by your state or local government or other organizations. Just pick your state to search for programs
www.hud.gov

Source: Neighborworks

Refinancing Do's and Don'ts

How many of you receive those "special offers" in the mail...the ones suggesting you've been pre-approved for a mortgage loan, refinance or streamline? I receive at least 5 each week.

Remember my prior post on "pre-approval and "pre-qualified"?
Review that post to know there are differences between those two terms.

When you are wondering how you are going to pay your mortgage and other bills, it may appear very attractive to borrow against your house. But consider this: if you cannot make your current payments, increasing your debt, even if you get some temporary cash, will make it harder to keep your home.

Refinancing your home may be one of the most important and complex financial decisions you'll ever make.
Below is the top ten list of advice to consider before you sign that loan document.

Use your home's equity carefully. Remember, building equity in your home is a key way to build wealth and financial stability. It builds slowly over time. Homeowners may be able to get some cash by repeatedly refinancing their homes but they will lose equity in their homes. A loss of equity also occurs each time homeowners finance new points and fees.

Never borrow more than you really need. When refinancing, borrow only for items that are needed to protect the home’s equity, such as a lower interest rate, home improvement or other asset building expenditures. Don’t throw away your long term financial security on short term indulgences like vacations or other temporary luxuries.

Think twice before using up equity on unsecured credit. Many solicitations lure borrowers with ideas that they can wipe out their credit card debt with a home equity loan or refinancing their current mortgage. Those debts are unsecured but your home loan isn’t – defaulting on that payment could lose you your house, not just affect your credit rating.

Shop around. Borrowers should talk to several lenders to find the best loan for which they qualify. Understand the best loan terms available in the marketplace and compare the APR (annual percentage rate) of loans from different lenders. The APR takes into account both the interest rate and the points and fees of the loan.

Say NO to "easy money." Borrowers should beware if someone claims "their credit problems won't affect the interest rate." If it sounds too good to be true, it probably is. If a solicitation is really interesting, get it in writing!

Understand the loan terms. Borrowers should compare loan terms from different lenders. Ask for written estimates that include all points and fees.

Find out about prepayment penalties. Borrowers should know if the loan offered to them has a prepayment penalty. Prepayment penalty should be a choice, not a requirement.

Make sure all the loan documents are complete. A borrower should not sign documents that have incorrect dates or blank fields. Be wary of promises that a lender will "fix it later" or "fill it in later."

Ask about additional fees. Borrowers should question any items they didn't ask for. Borrowers should also beware if they are told that single premium credit insurance is required to get a loan, or that purchasing it will help loan approval. Review every fee and compare different lenders' fees to ensure the most competitive loan terms.

If not sure, don't sign. Seek advice from a trusted financial adviser or local NeighborWorks or other homeownership counseling organization.

Source: Neighborworks

Understanding Contract Terms

Let me describe the three basic contracts used to secure payment of money owed on a home.

Trust Deed:
A trust deed means just what it says. The deed to the house is held in trust until the balance is paid off. In addition to the trust deed, a promissory note is signed by the person making payments. The note states all terms required of the buyer in paying off the remaining balance. The note is secured by the trust deed. The trust deed document is secured by your home.

A trust deed document involves three people:
1) The Grantor: the grantor is the home buyer. They make you the monthly payments.
2) The Trustee: The trustee holds deed to the house until the balance is paid. If the trust deed goes into default, the trustee is responsible for foreclosing on the house. The trustee would normally be your attorney.
3) The third person on a trust deed is you.

You're referred to as the beneficiary. The beneficiary is the owner of the trust deed & note. They have all rights to the money owed secured by the documents.

Mortgage:
A mortgage does the same thing as a trust deed. However, there is no trustee involved. Again, a promissory note is signed stating how the debt on the mortgage will be paid. A mortgage document involves two people:

1) The Mortgagor: this is the person the home was sold to. They will make the specified payments.
2) The Mortgagee: this is the home seller. They own the mortgage and note, and have all rights to the money owed.

Land Sale Contract:
Land sale contracts can go by many titles in different states; real estate contract, property sale agreement, purchase contract or contract for deed. They all mean the same thing. No promissory note is used. All the terms on how the debt is to be paid are in the contract. Title to the house is held by the seller when using these contracts. When the debt is paid off the seller transfers title to the buyer. The buyer only gets title when you use a trust deed or mortgage.

Some home sellers prefer land sale contracts because they can hold title. If they ever had to foreclose the process is easier. Seek the advice of your attorney on this.

FREE OFFER by AC Associates

When I was interviewed by Hali (see prior post-), I mentioned a free offer by my company would be upcoming. I don't want this sounding like just a sales pitch.


I am proud to offer my 54 guide booklet for free to any home owner wishing to learn an alternate way of selling their property and realize they can receive all cash..This sales method is legal, safe and proven.

Actually, anyone in the real estate business would benefit from using this method of sales, as would developers and/or contractors.

Why am I offering this for free ?

I want to help educate those who show an interest and provide a win-win situation. I want to spread the word that there are other alternatives when selling property.
I strongly believe in helping others.

There is no cost or obligation and I will even pay for shipping.

This sales method gets overlooked far too often simply because many are either not aware they have this option to sell their property or they are so used to the standard, familiar way of selling property. I find that people are afraid to learn something new. Open your minds, knowledge is a wonderful thing! And, how good it feels to accomplish this on your own.

I am in a position to help anyone who wishes to receive all cash by offering owner financing and selling your contract immediately. If you are in a financial position where you don't need all cash, a contract can be a great investment. You can defer paying taxes on the gain, plus you'll get a better interest rate than banks pay. You get a nice income secured by your home. If you need to raise cash in the future, you simply can sell a portion of the contract or sell in it's entirely.

There are so many ways people can benefit from owner financing:
1) Home sellers can sell a house quickly on their own without giving commission to realtors.
2) Real estate agents can sell listings faster.
3) Home buyers benefit by getting terms that are favorable. No bank red tape hassles, no points or origination fees.
4) When Dissolving partnerships, whether in marriage or business, a contract can be easily sold and the proceeds divided.
5) Contractors and/or Developers can (and do) use this method to sell property and receive all cash when selling the new note
6) More individuals are able to purchase homes

The bottom line is owner financing solves many problems and everyone involved is in a win-win situation.

You may be thinking "this sounds too good to be true" and I know the saying goes...it usually is, but not this time. This is a solid offer to receive this guide booklet( with sample forms and checklists) for FREE. It explains this sales method in simple, easy to understand language. I provide all the support necessary to be successful.

Just contact me and request your guide booklet.
andrea@acassociatesusa.com
http://www.acassociatesusa.com

Here’s What One Happy Home Owner Has Said AfterUsing This Program:

“I sold my rental home to the first couple who looked at it. I had it up for sale for only 10 days and I received over 100 calls in the 1st week from following the methods of advertising. I had been so busywith work that I didn’t have the time to show it, or call people back for the 1st ten days. It cost me $50 in all for advertising. My rental unit had been rented out for 3 years with no repair during that time. As a result, it needed $10,000 in repairs. I didn’t even have to repair anything. Your methods found me a buyer that paid me $2000 over the appraised value price.” John Alexander San Antonio, TX

Managing Your Money for Homeownership

For many people, home is more than shelter: it is their biggest investment and a considerable financial asset. The difference between what your house is worth and the amount you owe is called your equity.

The first and most important way to protect your investment is to make sure you have enough money budgeted each month to make the PITI (principal, interest, taxes and insurance) payments on your mortgage loan and set money aside for home maintenance. You made a family spending plan when you were saving for a home. Now it is time to make a new spending plan to include all the expenses of homeownership.


To make a spending plan, meet with your family to budget your normal expenses, plus the new costs of homeownership, including:

Mortgage Payments: monthly principal, interest, taxes and homeowners insurance payments, as well as homeowners association fees and mortgage insurance if required.
Utilities: average monthly costs for electricity, gas, water and sewage, and trash collection
Routine Maintenance and Repairs: monthly savings for preventive maintenance and repairs (1 percent of the purchase price of the house for annual maintenance and repairs divided by 12 months)
Reserves: monthly savings for emergencies and/or goals (at least one month’s mortgage payment divided by 12 months)
*Note: Consider signing up for a “budget” or “average payment” plan with your gas and electric companies. Based on the history of gas and electric use in your home, the company will estimate the annual cost and divide it by 12 months. Once a year, the company will adjust the monthly payment up or down to reflect actual use. Then you pay the new amount for another year.

Paying a set amount each month for some of your utilities helps with budgeting since it spreads the high cost of winter heating or summer air conditioning throughout the year.

Developing a Savings Plan
Put money in savings on a regular basis. Ideally, you want enough savings to cover emergencies, routine maintenance and repairs, and your goals. Financial experts recommend building an annual emergency fund that is equal to one percent of your home’s purchase price. The amount of money you need to set aside to reach your goals depends on what your goals are and when you want to reach them.

Remember the Credit Trap
New homebuyers should not take on any new debt for car loans, credit cards or revolving credit for at least one year after closing. It will take that long to get used to making the new mortgage payments and to really understand how much it costs to take care of your home.

Avoiding Foreclosure

If you can’t make your next mortgage payment, or if you are already behind, you need immediate help. The Homeownership Preservation Foundation has joined forces with mortgage lenders, nonprofit organizations and city government agencies to provide homeowners with assistance and resources to help you get back on track.

Visit the Hope for Homeowners website, or call the homeownership hotline at 1-888-995-HOPE for immediate assistance.

Here are a few tips from NeighborWorks for avoiding foreclosure:

* Take advantage of pre-purchase counseling or financial education offered by nonprofit organizations

* Free pre-purchase counseling is offered through local governments as well as nonprofit organizations.

* Avoid prepayment penalties and balloon payments.
People who refinance their mortgages with loans containing prepayment penalties or balloon payments are more likely to undergo foreclosure, according to a study by researchers at the University of North Carolina. According to the study, a prepayment penalty increases foreclosure risk by about 20 percent. Mortgages with balloon payments were 46 percent more likely to go to foreclosure than loans without. Protect the equity in your home – it’s a valuable source of wealth that will build over time.

* Stay on top of home repairs and maintenance. NeighborWorks organizations provide counseling in home maintenance and repairs and rehabs that improve the value of a home. Too often emergency repairs and less-than-trustworthy contractors push a homeowner into foreclosure.

What should you do if you miss a payment?
More than half of those in foreclosure did not call for help when they fell behind in their mortgage payments. Calling for help is the most important factor in preventing foreclosures.

Notify the bank as soon as you know your payment will be late. Calling when you are 30 or 60 days late is better than calling when you are 120 days late Remember that foreclosure is not in the best interest of lenders – lenders report that it costs up to $50,000 or almost half the loan balance each time they write off a foreclosure.
Work it out. Depending on the situation, the lender may lower the interest rate, lower the borrower’s monthly payment, or enter into a repayment agreement for missed payments.

What are your options if you cannot make payments?

Forbearance – You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.

Reinstatement – When you are behind in your payments but can promise a lump sum to bring payments current by a specific date.

A Repayment Plan – If your account is past due, but you can now make payments, the lender may agree to let you catch up by adding a portion of the past due amount to each current monthly payment until your account is current.

Modifying Your Mortgage – The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments). One solution is to add the past due amount into your existing loan, financing it over a long term.

Selling Your Home – If catching up on payments is not possible, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.

Property Give-Back – The lender can allow you to give-back your property-- and then forgive the debt. Give-backs do, however, have a negative impact on your credit record, although not as much as a foreclosure. The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens against the home.

Again, if you do fall behind on your mortgage payment, don't waste another minute, call your lender before it's too late.

How To Shop for a Loan

There are hundreds of mortgage lenders that will pre-qualify and pre-approve you for a mortgage loan. Don't let these two terms confuse you. See my prior post on pre-qualify/pre-approval for clarification.



Major categories of mortgage lenders include:

Savings & loans: Also called thrift institutions, savings and loan associations (S&Ls) are the largest traditional lenders of residential home mortgages.

A government cleanup of bad loans at S&Ls that ended in the 1990s left behind the stronger S&Ls. These institutions remain a major source of funding for home mortgage loans. S&Ls are often called savings banks in the eastern U.S.

Commercial banks: Commercial banks offer attractive loan terms, particularly if they evaluate their entire banking relationship with you. Some commercial banks have their own real estate departments and will service your mortgage loan.

Other commercial banks sell their mortgages to Fannie Mae and Freddie Mac, two major government-sponsored enterprises that specialize in buying residential mortgages from lenders.

Mortgage bankers: Mortgage bankers borrow money from banks or pools of investors, underwrite the loans, and sell them to investors for a profit. They often receive a fee from these investors for servicing your mortgage. Mortgage servicing includes collecting monthly payments, sending out loan statements, and collecting on late payments. For more information, see the Web site of the Mortgage Bankers Association of America (MBAA).

Mortgage brokers: Mortgage brokers circulate, or "shop," a loan application among lenders to find the most attractive terms for the borrower. In exchange, a lender pays the broker a fee.

Homeowners: The most overlooked and a financially beneficial method. You may find that the current homeowner is willing to offer financing in exchange for selling the home sooner. This means that the seller becomes your lender. A common means of financing is for the seller to accept a mortgage note. A mortgage note requires you to make monthly payments to the seller instead of a bank or other lender. See my website for add'l info: AC Associates

Credit unions: Since credit unions are owned by their members, they are called cooperative financial institutions. Since they are nonprofit institutions, credit unions may offer attractive mortgage loan rates to their members. Like commercial mortgage lenders, credit unions sell their loans to Fannie Mae and Freddie Mac to maintain access to new sources of funds. The National Credit Union Administration (NCUA) regulates the credit union industry.

Nonprofit community development and housing organizations: Throughout the United States, there are hundreds of nonprofit community-based organizations that work to rebuild neighborhoods that have fallen into disrepair, or to help low-and moderate-income families buy homes. Often, these organizations have money available from government or private grants to loan for home purchases or for home improvement loans. The interest rates are often less than the cost of bank loans and the repayment terms are easier for new homebuyers. Check with your city housing agency and ask for the names of non-profit housing groups in your area or search for local organizations that are part of national nonprofit networks, such as these:

NeighborWorks organizations: These local nonprofit housing advocates provide many services to low-income homebuyers, including homeownership training, financial counseling, foreclosure intervention, loans for rehabilitation and repair of existing properties, and, sometimes, home loans. There are hundreds of these local nonprofits nationwide. Visit www.nw.org for more information.

HUD-Approved Housing Counseling Agencies: These local nonprofit and public agencies offer rental, homeownership and foreclosure prevention counseling. They can also help you obtain mortgage financing directly from them or through referrals to local lenders. Visit HUD's website for more information.

Government Agencies:

State or Local Housing Finance Agencies: Almost every state has a housing finance agency (HFA) that works with state and local groups to revitalize neighborhoods and promote homeownership. They also provide financing for special uses, including rehabilitation of existing home. HFAs may have financing available at lower interest rates or require lower down payments and closing costs for low-and moderate-income or first-time homebuyers. City and county agencies generally perform the same function as state HFAs. Ask your local lender, real estate agent or a nonprofit housing organization about state and local government agencies. You can also visit www.ncsha.org for more information on state housing finance agencies.

Another Important Figure You Should Know

When applying for a loan, mortgage loan or other types of credit, Lenders use your debt-to-income ratio (how much you owe on credit cards and loans compared with how much you earn) to help evaluate your creditworthiness.

How You Can Figure Your Debt To Income Ratio:

1) Add up your total net monthly income. This includes your monthly wages and any overtime, commissions or bonuses that are guaranteed; plus alimony payment received, if applicable. If your income varies, figure the monthly average for the past two years. Include any monies earned from rentals or any other additional income.

2) Add up your monthly debt obligations. This includes all of your credit card bills, loan and mortgage payments. Make sure to include your monthly rent payments if you rent.

3) Divide your total monthly debt obligations by your total monthly income. This is your total debt-to-income ratio.

4) Take action if your ratio is higher than 0.36, which industry professionals would call a score of 36. The lower the better. Any score higher than 36 may cause an increase in the interest rate or the down payment on a loan you apply for.

Tips :
When you total your monthly debts, use the minimum payment on your statements.
When calculating your income, a lender will only consider money from a job that you've been at for at least two years.
Unreported earned income cannot be used in the calculation.

Know Your Loan-to-Value Ratio

Your loan-to-value ratio is something you should know. It's an important figure when getting or refinancing a loan or requesting the removal of private mortgage insurance (PMI).

Here's how you can figure it out.

If You Are in the Process of Getting a Loan:

1) Start with the purchase price of the property as the value for the property. (I'll use the amount $150,000 as an example.)

2) Subtract the amount of your down payment ($20,000 in this example).

3) Identify your loan amount (the purchase price minus the down payment; in this case $130,000.)

4) Divide loan amount (loan) by the purchase price (value). In this example, it would be $130,000 divided by $150,000, which equals 0.87, or 87 percent - your ratio.

5) Use this number with your lender when referring to your loan. You would say that you want a loan with an 87 percent Loan-to-Value or LTV.

**Most loans with an LTV over 80 percent require PMI.

If You Already Have a Loan:

1) Get an appraisal of your property. Once you own a home, this is the only way to get an accurate assessment of its value. (If you are just doing this for information purposes, you can save the appraisal fee and simply estimate the value by comparing your property to similar homes in your neighborhood that have sold. This will be the value number for the equation.)

2) Look on your most recent loan statement to find out how much you owe (your balance). This will be the loan number for the equation.

3) Divide the loan figure by the value figure. This is your ratio.

**If you request the removal of PMI, you'll have to provide an appraisal. In removing PMI, you may request in writing to your current lender that the PMI be removed if the ratio is 80 percent or less. If you request an appraisal and the value isn't high enough, you will still pay for the appraisal.

More on Loan-to-Value (From Wikipedia)