Friday March 22 , 2019

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Financing & Calculators

Understanding appropriate money leverage is the key to gratifying and beneficial real estate investment. For example, for every 1 percent difference increase in interest rate (5% to 6% as an example) a consumer loses 11% buying power. If the consumer could afford a $300,000 loan at 5%, they can only afford a $266,000 loan at 6%.

The Subprime bust, and subsequent Great Recession was largely set off by speculative real estate investments and over-leveraged buyers. Over the last 15 years, only 11% of all individuals choose to rent a single family home, a percentage that has not varied more than 1% in a decade and a half. Yet in 2006, four out of ten loans in the Western United States were for income properties (28%) or second homes (12%). Clearly, this was a broken system.

After the subprime fall, the mortgage world has tightened severely. Credit is tighter, documentation more extensive, contracts must be better written and appraisals evaluate a property's present and forecast it's appreciating (or depreciating) future.

The Social Media Real Estate Site Trulia offers a handy mortgage calculator and has more than a dozen commonly asked questions about how best to use a mortgage. Additional information on the financing process can be found by downloading my free Home Buyer's Handbook which has a chapter dedicated to this topic. You can find it by navigating to the "Buying a Home" Tab or Clicking Here.

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