DEAR BOB: What percentage of my monthly income can I afford for my mortgage payment? I am buying my first home. My only debt is a car payment with a balance of about $2,500 – Doc R.
DEAR DOC: The answer depends on your mortgage lender. Some conservative old-fashioned lenders say a home buyer’s principal and interest mortgage payment should not exceed 28 percent to 33 percent of gross family income. They also specify total debt payments should not exceed 36 percent of household income.
Purchase Bob Bruss reports online.
But many other lenders allow mortgage payments up to 40 percent, occasionally even 50 percent, of household income if there isn’t much other debt, as in your situation.
FHA and VA mortgages usually also offer quite liberal qualifications. I suggest you discuss your situation with at least a half dozen local mortgage lenders to get pre-approved in writing. Then you will know for sure the maximum mortgage available.
READER AGREES INTERNET MORTGAGE LENDERS SHOULD BE AVOIDED
DEAR BOB: Thanks for confirming, a few weeks ago, my opinion of the Internet mortgage lenders. I foolishly applied to refinance with a major Internet lender whose name is widely advertised. The whole procedure was a scam. The quoted interest rate was never available, although I promptly filled out the paperwork and cooperated 100 percent. It took over six weeks just to get approval “subject to appraisal.” The final interest rate was a half percent above the original quoted rate. I then told the lender to “get lost.” Now the lender threatens to sue me for the appraisal fee, even though it was just a “drive-by windshield appraisal.” Do you think I should pay the $375 appraisal fee? – Norman W.
DEAR NORMAN: No. You should be suing that Internet lender for fraud, misrepresentation, and breach of contract. Be sure to report the events to the lender’s state or federal regulator. Dishonest lenders like that give the honest mortgage lenders a bad image.
WHAT IS A “SHORT SALE?”
DEAR BOB: My 32-year-old daughter recently became a widow. She can no longer afford her home. The church next door wants to buy her home but is not willing to pay the balance on her mortgage. They say the house is worth less. What can she do to avoid foreclosure? She and her three children will be moving in with us – Nancy S.
DEAR NANCY: The circumstance you describe is called a “short sale.” That means the property is worth less than its mortgage balance.
You or your daughter should phone the mortgage lender, ask to speak with a supervisor, and explain the situation. Or you might prefer to write a letter to the lender, explaining the circumstances, and enclosing a copy of the church’s purchase offer for less than the mortgage balance.
The mortgage lender will probably have the house appraised. If the appraiser agrees the house is worth less than the mortgage balance, the lender might agree to a “short sale” to the adjoining church. Smart lenders realize a short sale loss is usually better than letting the property go to foreclosure sale and taking a bigger loss.
The new Robert Bruss special report, “10 Easy Profit Opportunities for Home and Investment Property Owners,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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