Why Do I Owe More Than My Home Is Worth?
Home foreclosures are at an all time high and people are losing their homes. Our country is in a huge real estate boom yet people are being kicked out of their home because they can’t afford the payments. Why? There are several reasons why foreclosures are high even in an excellent real estate market. If you are planning on selling your home, buying a new home or refinancing your home you need to pay close attention.
People are qualifying for more home on less income and less down payment. A couple of decades ago a new homebuyer would need a five percent down payment in order to buy a home. This same homebuyer would need to earn four times the monthly payment. So the numbers on a $200,000 house are as follows. Down payment of at least $10,000 and a yearly income of around $80,000. Today the same home could be bought for $0 down and a yearly income of $55,000. Do you see the problem? If a homebuyer doesn’t have to put anything down for a home they have no reason to try to keep it. Add the fact that the slightest hardship or over indulgence will put the homeowner behind in payments. If you want to save yourself the headaches buy a home you can afford. Make sure you can put at least 5% down and make sure that your payment is not too large. Use this simple calculation: Payment X 4 < Income. Your payment times 4 is less than your monthly income.
The other rule you must follow is making sure your real estate appraisal is accurate. Unfortunately people get caught up in the emotion of finding their home and forget that it is a large purchase. If your home is worth only $180,000 yet you pay $200,000 you are asking for disaster. Your bank will do their own appraisal but sometimes this appraisal could be way off. Why? Because the bank wants to make the loan. If you’re smart you will do your own home appraisal. There are several quick and free home appraisal websites and they actually provide very good appraisals. These sites ask a few simple questions about the home and location. In a few seconds you will have an accurate home appraisal and best of all it is free. Although there are several free sites on the Internet many will try to charge for other services so be careful.
So the bottom line is don’t buy more than you can afford, put something down on the home, and make sure you use several real estate appraisal services.
For more information on free online home appraisals, try visiting www.propertyhomeappraisal.com, a popular website that offers home appraisal tips, advice and resources to include information on real estate appraisal services and the best online home value sources.
