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how do lenders decide how much monthly

mortgage payment a borrower can afford?

Jessica · Posted: Fri Jul 08, 2005 3:15 am Post subject: RE:

Hi Nicholas

Generally lenders don't want borrowers

to spend more than 28% of their before-tax income per month on a mortgage payment, or more than 36% on total debts including

their mortgage payments.

Another way by which lenders evaluate how much a borrower can afford as the monthly mortgage

payment is the housing expense-to-income ratio. This ratio is the projected monthly housing expense (principal and interest

payment, property taxes, hazard insurance, homeowner dues, and private mortgage insurance) divided by the borrower's income.

This ratio should fall below 28% to 33%, although some lenders will go for higher values under certain

circumstances.

The borrower's total debt-to-income ratio should be no higher than 34% to 38% range.

Please

feel free to send any further query.

Regards,
Jessica.

Guest

jessica,

1. If I wanted to start investing in real estate, as far as buying more than one home at a time can I?

2. After (if I could) get lets say 3 homes and keep em leased out when I go to buy a new homes will my income have to be able to support those mortgages on paper? or will they off set because they are rentals?

3. Any home other there your primany home is a vacation home? is there a difference between that and investment home or property?

4. And could I by chance get all of these homes on interest only loans and write off 100% of the Mortgages on my taxes?

5. And If I hop around every two years and then sell these homes one by one I can write off up to $500,000 on taxes (Married Tax payer w/ 2yrs in home)?

sorry about all the questions at once i just have been reading and these are things i have read and not sure if they all work together, I am wondering what can work a situation for investment while utilizing any tax break I come across if legal. Thanks

blue · Posted: Wed Feb 15, 2006 3:16 pm Post subject:

Hi TJ,

As far as I know, your income should support your mortgages.

A vacation home can be bought for investment purposes as well as enjoyment and there are tax benefits too.

The interest on a vacation home is tax-deductible. But one thing I would like to mention is that you should consider at the same time whether you can afford all the mortgages, pay for extra utilities and maintenance and whether this investment suits your total personal financial condition.

For deduction purpose you will be able to claim for tax deduction on all the mortgage interests on the house related to purchase of investment property.

Hopefully I could answer your queries.

Regards,
Blue

Guest

Thanks Blue,
So I had rented out to family and or not rented it out at all then i can claim the write offs?

but if i rent out for no or at the exact price to cover mortgage and maintence then what is the % of the deduction?

where can i research more Strategies on maximizing my tax deductions while expanding my worth thru buying homes...

blue · Posted: Wed Feb 15, 2006 5:18 pm Post subject:

Hi TJ,

I think it will be appropriate to take half the interest as itemized deduction and the balance should be considered as an operational expense for the rental property and thus income from the property gets reduced.

This will help to cut your taxes. For filing your tax return, 50% of your mortgage interest and property taxes should be taken on Schedule E and the balance on Schedule A.

You can search on the internet for more related news and also can place your query and the information that you gather here.

This will help all of us in acquiring more knowledge through mutual discussion.

Regards,
Blue

ckalvesmaki · Posted: Thu Feb 16, 2006 10:20 am Post subject: TJ

Your personal income does not need to support the rental mortgage payment. On a property that you are purchasing there are a few additional items the broker will order with the appraisal.
1. Rent Schedule.....this is used to determine the approx amount of fair market value rent you can recieve by renting the property. The underwriter depending on the loan program will use anywhere from 70-100% of the rent schedule to offset the mortgage payment. If there is a renter allready in the property the lease needs to usually have 6 or 12 months remaining, depending on the lender, for them to use that rent if it's higher than the rent schedule.

2. Operating income Statement.......this is to determine what kind of future maint. cost the property will have based on a visual inspection of the property.....this also determines the % of rent to offset those costs for the underwrtiter.

Differences in property types......Primary residence is where you live.
If you buy another home that is less than, as a general rule of thumb less than 100 miles away, it will be considered an investment home not a second or vacation home.....with some exceptions i.e. you live in Denver and buy a condo in Vail.....Vail is clearly a destination resort town.

Cap gains tax only applies to first and second homes.......the IRS will use the same kind of guidelines lenders use above in other words don't go there and try to call your investment home a second home.

Hope this clarifies some of your questions

Guest

Cedric, Thanks getting clearer by the post.
Now if 1st home in L.A. and 2nd home would be 100 miles away *then If I sell those homes for Profit of less than $500,000 then I would not be obligated to pay capitol gain tax, is that right?

*now all my investment homes would have to be 100 miles away from 1st & 2nd, right?
* If I had 3 invest homes & 1st & 2nd and was ready to sell em how what would be the best way of selling the investment homes with trying to keep as much of the profit as possible, what methods would you recommend or urge one to research. Thanks in advance.

ckalvesmaki · Posted: Thu Feb 16, 2006 2:01 pm Post subject:

ok...let me back into this you can have a primary residence and a second home and you are able to avoid the cap gains on those as long as you meet certain criteria.....on an investment home no matter how far away it is you wil ALWAYS have to pay cap gains on those 1 mile away or 3000 miles away.

So if you own a home in LA and it is a primary residence and a second home in a "vacation" area" and it is not rented more than i believe 15 days a year you can call that a second home. A good CPA will probably depcraite the asset saving you on your annual taxes but there is nothing else you can really do except track exspenses etc.......That question is more for a CPA than a mortgage broker.

Suggestion start with 1 house at a time.

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