DOES LEASING A CAR AFFECT A BUYER’S ABILITY TO BUY A HOME?

As a mortgage professional for almost 20 years, I know just about every gotcha that can cause an underwriter to deny your loan. We look at monthly minimum obligations you pay on your debts. We take those minimum payments, including your proposed total mortgage payment (principal, interest, taxes, insurance, and private mortgage insurance), and then divide this by your gross income. This debt-to-income ratio is the barometer we use to determine your ability to repay the mortgage.

My wife, a college professor, texted me:

“My friend, who is a business/finance professor and contract attorney is insisting that leasing a car will not affect buying a home because it’s not debt… He says he also teaches Mortgage people this stuff.”

WIFE: “Can I tell him he’s wrong?”

ME: “Yes, he’s wrong. It’s debt!” 

WIFE: “LOL, I knew it! He is generally full of crap, but when he said that’s what he teaches in his classes, it made me pause.”

Imagine you have a $375/month car payment, which is nearly equivalent to $75,000 in spending power when buying a home. Or imagine you are a 2-car family spending $750/month on car loans. This reduces your buying power by $150,000. So instead of affording that charming $500,000 home, you have had your eye on, your max is only $350,000. As my clients know too well, this could hinder getting into that perfect neighborhood with the right schools and the short commute you so desperately want.

And here is the rub – a leased vehicle is even worse. Are you listening, Mr. Professor? Most of us know that when your lease period expires; you either lease again, or keep the leased vehicle with a large buyout (this could be money you need for your down payment or closing costs for a new home). Whereas with a conventional car loan, when you make your last scheduled payment, you own the car free and clear (aka no debt).

Also, in some circumstances, if you are a few months shy of paying off your auto loan, an underwriter will not hit you with the monthly auto debt and will not hold it against your ratios. You can see why the hair on the back of my neck jump to attention hearing this professor tell his many students that a car lease is not debt and will not affect their ability to buy a home. Rubbish!

This one financial decision can be the reason you miss that opportunity to get into your dream home. When something sounds too good to be true, it genuinely is too good to be true. My best advice is to sit down with a trusted mortgage professional before paying off any debt, or restructuring those credit card balances, and work through your debt-to-income ratios with someone who does this every day.

ALERT! 3 Mortgage Scams to Watch Out For (And How to Avoid Them)

Scam Alert! Three Mortgage Modification Scams to Watch out for (And How to Avoid Them)As if homeowners in Sacramento who are facing foreclosure don’t have enough to worry about, a multitude of loan modification scam artists have invaded the internet, public files and even foreclosure notices in newspapers in hopes of targeting their next victim. By identifying the top three modification scams and learning how to avoid them, at-risk homeowners can protect themselves (and their homes). Continue reading “ALERT! 3 Mortgage Scams to Watch Out For (And How to Avoid Them)”

A 2-Minute Guide To Flood Insurance: Do You Really Need it?

The 5-Minute Guide to Flood Insurance: What It Is, How It Works, and Whether You Need ItYou’ve got house insurance, and assume your property is covered for any type of detrimental occurrence that can possibly take place.

However, not all homeowners in Sacramento are aware that home insurance policies don’t necessarily cover damage related to a flood, as the risks are too great. As a result, homeowners must purchase flood insurance through a private company.

Floods are one of the most common hazards in the US, costing billions of dollars in damage to properties every year. And more importantly, if you are in the process of shopping for a new home in Sacramento or anywhere in California for that matter, budgeting that monthly payment, its good to know if flood insurance will be required. Continue reading “A 2-Minute Guide To Flood Insurance: Do You Really Need it?”

Buy A New Home Just One Day After A Short Sale or Foreclosure? Yes, You Can!

Flex-Banner_600x315px_mockup5Comstock Mortgage, has been helping buyers into homes for over thirty years. Buyers can qualify for the Flexible Credit Home Loan Program just six months after bankruptcy – and just one day after short sale or foreclosure.

Losing your home to foreclosure or going through a short sale is one of the most disheartening experiences the modern homeowner can endure. Traditionally, a defaulted mortgage has meant years of poor credit and renting rather than buying. Continue reading “Buy A New Home Just One Day After A Short Sale or Foreclosure? Yes, You Can!”

Homeowners — Tips When Filing Next Years’s Taxes?

Planning For Your Next Year Tax Deductions

I hate doing my taxes! The only I like about tax season is the chance to see my good friend Donna Gary. I hate prepping all my documentation for my tax person. But, It is my chance every year, to be reminded of the fact, this is what my clients do for me on a daily basis. They give my piles of paperwork, and then I push them together into a pretty pile for the underwriter. Filing your taxes can be a complicated and confusing process. If you are a home owner you may have many home tax deductions and credits to consider.

Since we recently passed the filing date for 2012 taxes, it may be a good time to plan for next year and get your tax tracking systems in place. Check carefully to make sure that you are not making any of these common homeowner tax mistakes – which could cost you money or get you in trouble with the IRS. Continue reading “Homeowners — Tips When Filing Next Years’s Taxes?”