Handouts For Tenants

The following mortgage related topics would help you to decide either to buy a house or keep renting.

(01) Rent or Buy?
(02) How Much Can I Afford To Spend?
(03) How To Calculate Your Mortgage Payment?
(04) How Much Money Do I Need To Buy A Home?
(05) Learning About Your Credit


Deciding whether to rent or buy is a complex
decision. You will need to compare costs and understand the financial factors to make the best decision for your situation. Personal benefits of home ownership can include:

a. More living space.

b. Freedom to design and decorate your home.

c. Home security. You don’t have a landlord to ask you to leave.

Home ownership is like having your own business and having your own job security and having a peace of mind. And you don’t have to worry about getting fired or if you are going to have a job tomorrow or not.


For a general idea of your buying power, multiply your annual gross income by 21/2. For example, if you had a household income of $50,000.00, you might be able to qualify for a $125,000.00 home price. The actual number may be more or less, depending upon your individual situation, like your debits and credit history. Mortgage lenders generally use either one of the following two ratios or both them to help them determine how much you can afford to spend each month on your mortgage payment.

As a general guide, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. This percentage can change, depending on the type of mortgage you choose.

Your buying power can be affected by factors such as your income, debt and credit history. Your debt, such as credit card bills and car loans, and other expenses such as housing expenses, alimony and child support, should not be more than about 30-40% of your gross income.


The amount of your mortgage payment will depend on how much you borrow, the term for repayment period, and the interest rate. If you know how much you need to borrow, which is the purchase price minus your down payment, and what the interest rate will be.

If your down payment is less than 20 percent, you may need to pay private mortgage insurance. In addition, if you are thinking about buying a unit in a condo or cooperative building, or a house in Planned Unit Development (PUD), you may also need to pay monthly home owner’s association fees to cover maintenance expenses or special assessments related to the common areas.

You can use the following chart to find out what your monthly payment will be per each $1000 loan, with a standard 30 years fixed interest rate mortgage. This chart includes only principle and interest payments, and not property taxes and home owner’s insurance. For example, if your home loan amount is $1,000.00 at 5% interest, for 30 years, your monthly P & I payment is $5.37 per month.

                    MORTGAGE PAYMENT TABLE

% /        5              10              15              20              25              30              40

4           18.42       10.12        7.40           6.06           5.28          4.77           4.18

4.125   18.47       10.18        7.46           6.13           5.35          4.85           4.26

4.25     18.53       10.24        7.52           6.19           5.42          4.92           4.34

4.375   18.59       10.30        7.59           6.26           5.49          4.99           4.42

4.5       18.64        10.36       7.65           6.33            5.56          5.07           4.50

4.625   18.70       10.42        7.71           6.39           5.63          5.14            4.58

4.75     18.76       10.48        7.78           6.46           5.70          5.22            4.66

4.875   18.81       10.55        7.84           6.53           5.77          5.29           4.74

5           18.87       10.61        7.91           6.60           5.85          5.37           4.82

5.125   18.93       10.67        7.97           6.67           5.92          5.44            4.91

5.25     18.99       10.73         8.04           6.74           5.99         5.52            4.99

5.375   19.04       10.79         8.10           6.81           6.07         5.60            5.07

5.5        19.10       10.85        8.17           6.88           6.14          5.68            5.16

5.625   19.16       10.91         8.24           6.95           6.22          5.76           5.24

5.75     19.22       10.98         8.30           7.02           6.29          5.84           5.33

5.875   19.27       11.04         8.37           7.09           6.37          5.92           5.42

6           19.33       11.10         8.44           7.16           6.44          6.00           5.50

6.125    19.39      11.16         8.51           7.24           6.52          6.08           5.59

6.25      19.45      11.23         8.57           7.31           6.60           6.16          5.68

6.375    19.51      11.29         8.64           7.38           6.67          6.24           5.77

6.5        19.57       11.35         8.71           7.46           6.75          6.32           5.85

6.625    19.62      11.42         8.78           7.53           6.83           6.40          5.94

6.75      19.68      11.48         8.85           7.60           6.91           6.49           6.03

6.875    19.74      11.55         8.92           7.68           6.99           6.57           6.12

7            19.80      11.61         8.99           7.75           7.07           6.65           6.21

7.125    19.86       11.68        9.06           7.83           7.15           6.74           6.31

7.25      19.92       11.74        9.13           7.90            7.23           6.82           6.40

7.375    19.98       11.81        9.20           7.98           7.31           6.91           6.49

7.5         20.04      11.87        9.27            8.06           7.39           6.99           6.58

7.625    20.10       11.94        9.34            8.13           7.47          7.08           6.67


You need money for:

a. Down payment

b. Closing costs

c. Other housing relate costs, like mortgage payments, maintenance, and repair costs

Your down payment is a percentage of the value of the house you want to buy. The exact percentage depends on the requirements of the lender for the type of mortgage you choose. In order to qualify for most mortgages, you will need a down payment between 3% - 20% of the sales price.

You may be required to have Private Mortgage Insurance (PMI) if your down payment is less than 20%. Private mortgage insurance protects the lender if the mortgage goes into default. You may be able to cancel your mortgage insurance under certain circumstances. For example, when your loan amortization reaches a certain percentage or your property value increases due to a favorable market value of home improvements.

You will need additional money for closing costs. These costs vary by region but generally range between 2% to 7% of the property value. Closing costs include: points, origination fees, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other costs. You will receive a written estimate of these costs from your lender after you apply for the mortgage.

a. Determine the property value of homes that interest you.

b. Review different mortgage products and compare their required down payment amounts to the money you have available.

c. Get an estimate of our closing costs from the mortgage lender or a real estate professional.

d. Add the down payment requirements and the closing costs together to determine the amount of money you will need.

e. If you don’t have enough money, you will need to begin saving for the difference.

Funds for your down payment can come from the following sources:

Savings account, bonuses, commissions, Mutual funds, Securities, Proceed of life insurance, IRA, 401 (k) or Keogh funds, Charitable organization gift programs, Government grant program and subsidized secondary financing.

You can use gift money from a relative towards a portion of your down payment. Some mortgage lenders may require that a certain amount of the down payment come from a documented savings that you have accumulated personally. Ask your lender about their gift money requirements. The amount of the gift may also be limited in some mortgage programs. Usually the mortgage lender requires a gift letter verifying that the gift is not a loan and that you do not have to repay it.


Your credit is very important part of the home buying process. Now that you have decided that home ownership is right for you, you will need to get ready and look for a mortgage. Lenders will review your credit report, which is a history of how you have managed your finances and repaid debt. It provides information on money you have borrowed and a history of your payments.

Your credit history is pulled together into a credit report. The information on your credit reports are provided by three private companies: Equifax, Experian, and Trans Union. These companies sell your credit report to banks and other creditors so the can review mortgage and loan applications.

Your credit report includes:

A list of your debts: such as credit cards, and car loans, and history of how you have paid them.

A list of bills that have been referred to a collection agency. This can include items like phone, and medical bills.

Public record information: such as tax liens, or bankruptcies, even if these have happened several years ago.

Inquiries made about your credit worthiness. An inquiry is made when you request credit. Many times your report will also show if you were given credit based on the inquiry.

Most of the information in our credit report is deleted after 7 years. A bankruptcy is deleted after 10 years and is continuously updated to reflect the latest information.

It is important that you look at your credit reports from each of the three companies to make sure they are correct. Your credit report may vary from one company to the other.

Under the Fair Credit Reporting Act (FCRA), you can get a free credit report once during any 12 month period if you certify it in writing that:

You are unemployed and intend to apply for employment with in 60 days, or you are receiving public welfare, or you believe that your credit report contains inaccurate information due to fraud.

You can also get a free copy of your credit report if you have been the subject of an adverse action, such as being denied credit within the last 60 days. To obtain your credit reports, contact the three companies below.

Equifax P. O. Box 740241 Atlanta, GA 30374 Phone: (800) 685-1111

Experian National Consumer Assistance Center P. O. Box 2002 Allen, TX 75013 Phone: (888) EXPERIAN www.Experian.com/consumer

Trans Union LLC Consumer Disclosure Center P. O. Box 1000 Chester, PA 19022 Phone: (800) 888-4213 www.transunion.com

If you believe that any one of your credit reports contains mistakes and you with to dispute or correct the mistake, contact the company that developed the report.

Under the Fair Credit Reporting Act (FCRA), the company must complete an investigation, usually within 30 days. Within 5 days of completion, the company must provide you written notice of the results, including a copy of your credit report if it has changed based upon the dispute.

The Federal Trade Commission (FTC) enforces the FCRA and publishes brochures about credit. To contact the FTC, call or write: Federal Trade Commission Consumer Response Center 6 TH & Pennsylvania Avenue, N.W., Washington D.C. 20580 Phone:
(877) FTC-HELP or (877) 382-4357 www.ftc.gov

When you apply for a mortgage, the lender may request a credit score as well as a credit report. A credit score is a computer generated number that indicates your ability and willingness to repay a debt based on your credit record.

Your credit score is part of the mortgage information that will decide if your application is approved. Your credit score may also be used to determine the mortgage interest rate.

For example, if you charge up to the limit on your credit cards, even if combined they don’t add up to a lot of money, this might hurt your credit score. Or, if you have recently applied for a number of credit cards, even if you have not begun to use them yet, your credit score might be affected.

However, if you show a pattern of managing your credit wisely, keeping credit card balances low and paying your bills on time consistently, your credit score will be positively affected.

The most commonly used credit score today is known as a FICO score, developed by Fair, Isaac & Co. Inc.. FICO scores are ranked on a scale of approximately 400 to 900 points. Statistically, consumers with higher credit scores are more likely to repay their debts than consumers with lower credit scores.

If your credit score is low, remember that no credit score lasts forever. A credit score is a snapshot based on current information in your credit. There are things you can do today to improve your credit score in the future.

Paying one of your bills a few days late only one time usually will not impact a credit score immediately or significantly. Credit scores reflect credit patterns over time. However, an adverse action, like a tax lien or bankruptcy filling, can immediately and significantly impact credit score.

Mortgage lenders look at other information besides your credit score and credit record before deciding whether to give you a mortgage. They look at:

a. Stability of your income.

b. Employment history.

c. Monthly debt payments (Credit card bills, car loans, etc.) in relation to your income.

d, How you save money and how much you have

e. The type of mortgage you are considering

f. The type and value of the property you want to buy

g. The amount of the down payment you plan to make

h. On time payment of rent and utilities

The key is to have a good balance between your capacity, credit, and collateral, the three C’s. BUILD GOOD CREDIT

Building good credit doesn’t have to be difficult. Follow these tips and you are on your way:

1. Pay your bills on time.

2. Pay at least the minimum amount required.

3. Keep credit card balances low.

4. Don’t apply for too many loans or new credit card accounts.

5. Establish credit if you have none.

1. Get your credit report a few month before you plan to buy a house, so you have time to correct any errors, before applying for a mortgage.

2. Find out your credit score and review the information that comes with it.

3. The last 2 years count most. Your credit score looks most closely at the last 2 years.

4. But the last 7 years count too. Your credit report tracks your payment history over the last 7 years.

5. Shop for a mortgage, within a 2 or 3 week period. When you apply for a mortgage, the lender requests your credit report and the inquiry of that request show up on the report. All inquiries during a 2 week period only show as one inquiry. A couple of inquiries on your credit report are okay, but more can lower your credit score.

6. Don’t apply for new credit or make major purchases, such as a new car, right before you apply for a mortgage.

7. If you believe you have credit problems, get help from a credit counseling agency before you apply for a mortgage.

8. Don’t be discouraged if you have credit problems. You don’t need perfect credit to qualify for a mortgage. But people with perfect credit tend to get better interest rates than people with less-than-perfect credit. Beware of predatory lending practices that take advantage of credit problems.OTHER ADVICE

Do not take money away from your down payment savings to pay off debts with less than 10 months. These debts don’t count in underwriting.

Do not incur any new debt. For example, don’t buy a new car a week before you apply for a mortgage.

Keep your spending in check. Save as much money as possible.

Please, call me if you need help to get a loan and/or buy a house or sell your house. Thank you for your business.
        GOOD LUCK
Please call me anytime if you have any question (909) 754-4947