Setting a Budget – How Much House Can You Afford?

The first step is talking with a mortgage broker.  Even if you can’t get approved for a mortgage right now, he can still help you determine how much you can get approved for later.  He has formulas that calculate the maximum amount you can qualify for in a mortgage.  These formulas are based on your income and debts.  Most mortgage lenders use a debt-to-income ratio (DTI) of 28/36 and FHA limits are typically 31/43.  Let me explain what those numbers mean.

Budget Planning

The first number in the debt-to-income ratio (DTI), 28 (or 31 for FHA) is called the front ratio.  The front ratio is the percentage of income that can count towards housing costs, or PITI, which are Principal, Interest, Taxes and Insurance.  That means that 28% (or 31% for FHA) of your gross income (before taxes are taken out) can count towards these costs.

The second number, 36 (or 43 for FHA) is called the back ratio.  The back ratio includes the amounts from the front ratio (PITI) plus any other recurring debt payments, such as car loans, credit cards, student loans, child support, alimony or legal judgements.  This does not count things like groceries, utilities and so forth.  Again, this means that 36% (or 43% for FHA) of your gross income can count towards these costs.

Let’s take a look at an example.  Suppose your annual household income is $60,000 per year.  You divide that amount by 12 months, which equals $5,000 per month (before taxes).  Here is how we calculate DTI.

Front Ratio

$5,000 gross monthly income X .28 (the front ratio) = $1,400

$5,000 gross monthly income X .31 (FHA front ratio) = $1,550

Back Ratio

$5,000 gross monthly income X .36 (the back ratio) = $1,800

$5,000 gross monthly income X .43 (FHA back ratio) = $2,150

Excerpt from Rent-to-Buy: Your Hands-on Guide to BUY Your Home When Mortgage Lending is Tight.

If you are like many others who have come to my site to learn how to make more money by investing with little or no money down in lease options, I have an exciting opportunity for you. I am now offering a FREE online DVD to help you Learn How to put $5,000- $10,000 into your  pocket within 29 days using lease options .  I am sure you may have concerns and may be wondering if it is even possible in today’s Real Estate market when you do not have:

• Enough credit to purchase a property with a mortgage
• If you do not have enough cash to buy or put down
• You do not want to get stuck with a property you can not

Take a few moments from what you are currently doing and watch.

Here is what you will learn:

• Why Real Estate?
• What a Lease Option is.
• Why you need a Lease Options.
• 6 keys to success.

Check out the Box located on the right side of this blog and get it now!!

What can you do in today’s real estate recession?  How can you still make money as a real estate investor?  What works?

I know a lot of you are probably wondering about the answers to these questions.  The nature of real estate investing is very different than it was just a few short years ago.

If you want to find some answers and learn how to do profitable deals in this market you should check out this webinar this upcoming Tuesday night (January 19) at 8 PM EST.  I will be talking with Kris Kirschner about the current real estate market.

We’ll be looking at what techniques actually work RIGHT NOW and what you can do in this market.

There will be no sales on this webinar – it’s all about info.

This is a very special webinar and one you don’t want to miss.  Kris Kirschner is a genius in real estate who knows what is working right now in the market and how to invest even if you have no experience at all.

Space is limited for this webinar, so you’ll want to register now.  The webinar is free so if you are interested in real estate investing in today’s market you don’t want to miss this.

It’s this Tuesday, January 19 at 8 PM EST.  To register go to (click on the link)

http://www2.gotomeeting.com/register/452844410:
See you there! – Wendy

Check Here for Your Time Zone:
Tuesday, January 19, 2010
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Rapport building is very important and key because you’re asking someone to give you control of their house with little to no money down in both lease options and subject tos. Getting the seller to feel comfortable with you is the most important technique to learn for these techniques.  This is equally true with Realtors.  If the Realtor likes you, they will translate their like and trust of you to the seller for the lease options.

Here’s a tip: When you’re in the seller’s house, tell them what you like about their house, not what you don’t like.  For example, perhaps you’ll see something unusual, like older wood work or a nice fireplace.  Ask the seller about it.  If you see that the seller likes golf, talk golf whether you like golf or not.  Always focus on the positives, the interesting things.  People like to know that you like their house, and that builds immediate rapport.   Sellers will give you a better deal and be more likely to negotiate if they like you.

Check out Chapter 06 of my book Investing in Real Estate with Lease Options and Subject-to Deals: Powerful Strategies for Getting More when You Sell, and Paying Less when You Buy to learn more about negotiating the deal and other steps to buying on Lease Options and Subject Tos.

In the previous post I  discussed each contract and the basic points each covered.  Today, I am going to share with you the specifics of a Rental Agreement, the type you should have and some of the key clauses that should be included in the agreement.

Most good Rental Agreements take the guesswork out of the picture for you, making your life significantly easier. They do this by having all of the regular terms and conditions pre-printed. One important thing to remember is that you should NEVER draft your own rental agreements (or any other contracts for that matter) from scratch. Always use pre-created contracts (preferably pro-buyer) and just fill in the relevant details. Creating your own contracts can cause you enormous headaches and potential legal problems.

There are three different types of contracts:  Pro-Seller, Neutral and Pro-Buyer. You, as the buyer, will want pro-buyer contracts for your transaction, whenever possible. You can order these on my website if you don’t already have them. They offer you the most protection and the most favorable terms.   The type of contract can make a HUGE difference.  If you use the pro-buyer contracts, the seller is responsible for all repairs, or you can choose to share the expenses. Using a pro-seller contract or a lease from a real estate agent could result you might end up being responsible for ALL repairs to the property during your rental period.

Here are a few clauses you will find in my rental agreements that make them pro-buyer.

Insurance

It’s very important that the owner continue insurance. He or she is responsible for insuring his home during the rental period, not you. You will want to obtain renter’s insurance to protect your possessions, but the home itself must be insured by the owner (seller).

Maintenance, Repairs or Alterations

The Landlord gives the tenant the right to make repairs or improvements to the property at the tenant’s expense. This is where you will want to put in who will pay for what repairs. I personally like the owner to pay for repairs during the option period when I am the buyer.

Rental Payments

It is very important when you are doing a lease option that you make SURE the seller is paying his mortgage payment.  If he doesn’t pay it, your dream will become a nightmare.  I recommend you have your monthly payment made to their mortgage company versus to the seller directly.

Check out Chapter 7 of Rent-to- Buy for more insight into Rental Agreements.  Rent-to-Buy is a great gift for the Holiday’s.  Order  your copy  TODAY!!

In a rent-to-own sale the seller allows you, the future buyer, to live in the home for a while as a renter before you actually purchase the home from them. Before you move into the seller’s home as a renter, you and the seller would agree on the sale price and other terms. You would pay the seller a non-refundable option fee. Both you and the seller would sign some paperwork covering the lease, the purchase and the option

Once you have been approved by your seller, you have a few little details to take care of. You know things like moving into your new house, signing contracts and so forth. Here are a few tips from my book Rent-to-Buy that will help you.

Create a Folder for Your New Home

I strongly recommend that you get a file folder and keep all of your documents in it. This folder should have copies of all your contracts and paperwork. You should also keep copies of all payments, receipts, etc., in the folder during the lease period. An important part of being able to get a mortgage at the end of the rental period is having organized documentation to create a strong paper trail.

Draft All Documents: Rental Agreement, Sales Contract, Option Agreement, Memorandum of Option and Affidavit of Liens

Prepare the contracts before you move in so that you have everything ready to go. All of these contracts are available in my companion course, ‘Rent-to-Buy’, which is available in the “Wendy’s Store” section of www.WendyPatton.com.  I go into detail on this in my course with an audio step-by-step instruction CD to assist you.

Check if Taxes Have Been Paid

You’ll want to make sure the seller is paying their property taxes and that they are current. If the seller has a mortgage, there is a good chance that the lender requires an escrow account to cover property taxes and insurance. In this case, you’ll probably be able to verify that the taxes are current when you verify that the mortgage is current. However, not all mortgage lenders require an escrow account, and some sellers don’t have mortgages. In this case, you’ll need to verify from another source. Usually, you can check with your local Tax Assessor’s office (or whatever it is called where you live) to make sure the taxes are current. Many assessors’ offices now allow you to do this online. Otherwise, you should call the office.

Sign All Documents

It’s time to meet with the seller and sign all of the documents. Typically, you would do this before you move in. This allows you to lock in the deal and prevents the seller from finding another buyer. You would pay the option fee to the seller at the time all documents are signed. You might pay the rent and security deposit to the seller at this time as well or when you take possession of the home. Bring a pen or two!

Rent to Buy is currently available.  Rent to Buy is your hands-on guide to buying your next home as a rent to own.  You can get your next home NOW without having to qualify for a mortgage until later.  This is the solution you need until you can qualify for a mortgage.  This is the solution home sellers need because they can’t find mortgage qualified buyers.  Rent to Buy is a great option in our current real estate market.  Check it out!

Are you looking to take your real estate investing business to the next level? If so, you’ve come to the right place. This can be done by utilizing our Wendy Patton funding program.  We’ve heard your concerns about having all of the deals you can handle yet not enough money to get them closed and collect your profit check. Well, your concerns are over because we have created a solution to fund your entire purchase price and closing costs on your back-to-back flip closings.
Now you can negotiate with absolute confidence with sellers knowing that we are your funding solution. Contract with a seller, find an end buyer to pay you more the same day via a back-to-back closing and we will show up with the funding so you can be on your way to your next profit check.

How Does Transactional Funding Create An Opportunity For You, The Real Estate Investor?

Most investors are limited by their capacity to fund deals. In other words, when the money stops, the deals stop. We have created this funding system so you can totally eradicate that concern form your business. Access to our money gives you the ability to close more deals, make more money, and help more distressed homeowners. It is true “NO MONEY DOWN REAL ESTATE” in today’s market. Opportunity abounds.
What Kinds Of Deals Will We Fund For You?

• Short Sales
• REOs and Bulk REOs – Bank Owned Properties
• Probate
• Wholesale
• Residential or Commercial
• Land

If you are looking for ways to fund transactions for short term Wendy Patton Funding is exactly what you have been looking for. Click here for more ways Wendy Patton Funding can help you!

November 19-22 I will be holding the “Soft Market Investing” Boot Camp. This is four days of intense Real Estate Investing training during which you’ll learn:

• What strategies work best right now in today’s market
• How to maximize your profit potential when using these investing strategies.
• Strategies you’ll be able to implement the very next day!

The training offered at this event will be, without question, some of the best you have ever been a part of at any real estate event. You’ll walk away with the ideas and concepts that can put tens of thousands of dollars in your pocket! This Boot Camp will also be saturated with strategies and concepts that work in today’s market. As most of you know, I specialize in Lease Options and Subject To’s. Both of these strategies will be covered in detail during the Boot Camp!

And, given the current real estate market’s condition, this couldn’t be a more perfect time to attend the “Soft Market Investing” Boot Camp.

The first Boot Camp was held June 26-29 and was sold out! Hurry up and Register….Seats are filling up fast!!

Click Here to Register

The internet is one of our biggest resources. I have more than doubled traffic to my Wendy Patton website recently and am now on the front page of Google for 7 different searches! I am truly amazed at the results I’ve been getting.  Search Engine Optimization – or SEO – is a must know if you have a website or want to use a website to build up your business.  It can be one of the best ways to draw in clients there is. And the best part is you don’t have to pay for the advertising! If you are a real estate investor or a real estate agent this is must know information for building your business.

I can’t take credit for it though. I’ve gotten help. I’ve been working with an SEO expert.

This stuff is so powerful I wanted to share it. I am doing a webinar with this SEO expert Tuesday night, April 21st at 8 PM EST. You don’t want to miss it. He’ll be sharing how to get on the front page of Google and STAY there.  He’ll show you how to beat your competition and get your website optimized.  I love this stuff. It is very cool. We’ll look at things like using YouTube and Facebook to build up your website. The best part is you don’t have to be a techie to do this stuff!

You can register for this webinar on my Wendy Patton website or you can go here to register directly. There is no cost to sign up for this webinar, but space is limited so sign up soon.