Purchase price and American mortgage

How much house can I buy?


"How much house you can buy" is determined by "down payment + amount of loan". As one calculation method of the loan amount, you can reverse it from 'the amount you can repay each month without difficulty'.


■ Calculate monthly repayment amount


Set the amount of the mortgage, interest rate, repayment period, and calculate the monthly repayment amount on the loan calculation website or software (①). If you have a management association (HOA = Home Owner 's Association) like a condominium or town home, you add monthly administrative expenses, and in the case of a detached house add home owners insurance (fire insurance). (Condominium also needs indoor insurance There are cases). Then we divide the annual property tax by 12 months and add a one month burden. I will consider whether this sum is a reasonable monthly housing cost.





Loan calculation of Realtor.com: http://www.realtor.com/home-finance/

Zillow's loan calculation: http://www.zillow.com/mortgage-calculator/



■ Available amount

The amount of mortgage + down payment determined from the monthly repayment amount is the purchase fee.




Changes in interest rates on US mortgage loans


In the latter half of 2012, the mortgage rate in the United States recorded the lowest historical interest rate in the latter 3% range. Although it has been on a slight upward trend since then, it still keeps the first half of the 4% range (February 2014).

Although it may be a high impression compared to the Japanese mortgage which the ultra low interest rate continues, it seems that it is still easy for the general consumer to repay.


■ Changes in the interest rate of mortgage loans in the US (the number of balloons is 30 years fixed rate)




Reproduced with the permission of Mortgage-X.com


Preparation of pre-crew letter


In the preceding paragraph, we introduced a method to calculate the amount of loan from reasonable repayment amount, but it is not necessarily "amount you want to borrow" = "amount of money you can borrow". Let's start with getting a preliminary approval "Pre-Approval Letter" on the loan that consults with the bank or loan company before finding the property and how much it can borrow specifically.

In loan review, five factors, ① credit history ② amount of down payment for purchase funds, ③ stable employment, ④ ratio of income and repayment amount, ⑤ bank balance, are a major factor. Based on this, the purchase price zone becomes clear by having the loan amount temporarily approved (Pre-Approval) from the financial institution. Also, since this "Pre-Approval Letter" is required to put an offer in the property you want to buy, it is important to prepare as soon as possible.


Review items of American mortgage


Mortgage loans will be judged in terms of (1) the conditions of the borrower and (2) the conditions of the property to be purchased.


(1) Condition of borrower

For the borrower, the following five items are checked.


① Credit History: If the score is low, the loan amount may be limited or the interest rate may be high.


② Down payment: In case of private loan (Conventional Loan) it is more than 5% in general loan (Conforming Loan), more than 20% in large loan (Jumbo Loan) (highly likely), loan with government guarantee (FHA Loan) If it is 3.5% or more is the standard.


※ When borrowing Conforming Loan, if the down payment is 20% or less, it is better to be prepared more than 20% because the examination standard becomes severe or PMI (private mortgage insurance) is required to join is.


* Mortgage with guarantee by Federal Housing Administration (FHA) borrows money from the finance period like normal loans, but because the insurance is attached to the loan, that burden is necessary. In the event that a person borrowed by this insurance can not repay the loan, the financial institution buys back the receivables, so the standard of the down payment rate is low.





③ Work experience: You are required to work for the same occupation for over 2 years. Also two years' revenue proof is required (those who self-employed are necessary).


④ Ratio of repayment to income: The total amount of mortgage and other loans (cars, furniture, etc.) must be kept below 36 to 43% of annual income (Jumbo Loan is estimated to be less than 40%).


⑤ Bank balance: In addition to the down payment and house purchase expenses, you will be asked for the balance of the bank for several months (2-6 months, depending on the bank) of the monthly loan repayment amount.



(2) Condition of the property to be purchased

To borrow a mortgage means that the financial institution gives the obligation (first mortgage) to the property. We will rent money with the property as collateral, so we will judge whether the property is worthy of value.


The judgment of the property is based on the "safety" prescribed by the Department of Housing and Urban Development (HUD) of the Federal Government of the United States of America. In other words, it means that it is a property that meets the condition that you can live safely and comfortably, so if the house is in a state where it can not live safely, the water is damaged or it does not exist as it is in the register , There are cases where you can not lend your loan. Even when choosing a property, it is necessary to mind the conditions of the loan.





Because mortgage is very important in the purchasing process, it is important to consult a reliable mortgage officer at an early timing.



Crossline Capital Senior Housing Loan Officer

Takae Yokoyama







Real estate service

Residential home sales / Multi unit property sale / Lease



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