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Author:
Bev Dodd
Web Site: http://www.family-refinance-consolidation-loans.com
Home loan rate:
Flexible rates, easy terms
When
you are deciding on your home loan rate, compare different
rate/point combinations among lenders. Back end ratio requirements
vary across the different types of loans, but a good rule of thumb
is about a 38% total debt ratio for your home loan rate. We'll
discuss this more below.
Mortgage lenders
want to make certain that you can safely afford the monthly
mortgage payment. They will calculate your monthly expenses (cars,
credit cards, installment loans, student loans, etc.) and add the
proposed new mortgage payment into that amount, then divide the
total by your total gross monthly income. This ratio is known as
your back end ratio: Monthly Expenses + Proposed Mortgage Payment
(including taxes, homeowners association, insurance) \ by monthly
income = Back End Ratio. Back end ratio requirements vary across
the different types of loans, but a good rule of thumb is about a
38% total debt ratio for your home loan rate.
How much can I
afford for a home loan rate? This is the most important question
that people don't research, focusing on what their mortgage
payments will be, ignoring other monthly payments. This oversight
puts many people down the wrong path to bad debt. For example,
your monthly expenditures will be more than just the home loan;
there will also be homeowners insurance, flood insurance, mortgage
insurance and utilities.
When you are
deciding on your home loan rate, compare different rate/point
combinations among lenders. You should first convert each quoted
rate to one based on a constant number of points and then find the
lender with the lowest rate. In making this conversion, consumers
should use a traditional rule of thumb that equates each point to
a 1/4 of 1 percent change in the interest rate. This would make an
8 percent loan with 0 points equivalent to a 7.75 percent loan
with 1 point.
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