Buying a House

By: Barton Wyatt


When you intend to buy a home, you should estimate your budget that will help you to decide your affordability at the start. Your affordability is one of the important factors that leads to a choice making on the greatest choices presented. This phase includes listing the incomes, investments, debts and costs. When you list them into two groups- that are incomes and expenditures, and one under the other, after a simple math process you'll find your disposable income. In general, the lending options that you might have, are 3 times your gross income and 1 times your second gross income (if available) or 2,5 times your joint total income in total.

Several methods to figure out your affordability are listed below;

- price to income ratio,
- deposit to income ratio,
- actual monthly mortgage cost to take-home income ratio,
- the median house price to the median annual home income ratio,
- housing debt to income ratio.

The price to income ratio: It is the simple affordability measure for housing in a particular area. It is usually the ratio of median house prices to median household disponsable incomes, expressed as a percentage or as years of income. It is sometimes compiled separately for first time buyers and termed attainability. This ratio, applied to persons, is a basic section of mortgage lending decisions.

The deposit to income ratio: It is the minimum mandatory downpayment for a normal mortgage, expressed in months or years of income. It is mainly vital for first-time buyers without existing home equity; if the downpayment becomes too high then persons buyers might find themselves "priced out" of the market.

The actual monthly cost of the mortgage to take-home income ratio: It is used more in the United Kingdom where almost all mortgages are variable and pegged to bank lending rates. It offers a much more rational measure of the ability of households to meet the expense of housing than the crude price to income ratio. But it is more complicated to calculate, and consequently the price to income ratio is still more commonly used by pundits. In recent years, lending practices have relaxed, allowing greater multiples of income to be borrowed. Some speculate that this practice in the longterm cannot be perpetual and may in due course lead to too expensive mortgage expenses, and repossession for many.

The median house price to the median annual household income ratio: This measure has historically hovered about a value of 3.0 or less, but in recent years has risen dramatically, mainly in markets with severe public policy constraints on land and development. The Demographia International Housing Affordability Survey uses the Median Multiple in its 6-nation report.

The housing debt to income ratio: Aka, debt-service ratio is the ratio of mortgage payments to disposable income. When the ratio gets too high, households become increasingly dependent on rising property values to service their debt. A variant of this value measures total home ownership costs, together with mortgage payments, utilities and property taxes, as a percentage of a typical household's monthly pre-tax income.

You must also be concerned about that your general credit rating will be a key factor for the lending decision as well.

In decision making, there are a number of other decisive factors that you should evaluate as well as in budget issue. These are the elements of physical criteria that you should care about, and include the property features like design, size, age, numbers of rooms, garaging, parking, garden, heating, climating and the environmental features like position, infrastructure, neigbourhood, local conveniences, schools, clubs, transportation, shopping, pollution, nature etc. The pros and cons of these elements will help you to make a proper decision on the right option.

Go to sites that the properties are placed, and see the the details in personal. Keep in mind that, the places that you don't step on, don't belong to you. See all details, check what you will buy. Write down the states of roof, walls, windows, doors, plasterwork, wiring, plumbing, heating, kitchen fittings and bathroom sanitary ware. The assets that need to be replaced or repaired indicate extra cost for you. Never let the seller influence yourself, becasue the principle is WYGWYS. For the convenience and an actual assesment, build a check list in details that has the checking points and the fixing prices in it. At the end of the assesment, you'll have an estimation about what you'll buy, and that will not cause a bad surprise. If you can't do this by yourself, have an expert's help for not to spend too much in the future.

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