For thousands of years humans have been fascinated by numbers and their supposed influence on events. Sesame Street and De La Soul agreed that "Three is a magic number," many have fears associated with the "unlucky 13," and the number seven has long been a favorite for superstitious folks. While many individuals practice numerology as a way to determine a relationship between physical objects or living things, there is no arguing the value of the system in regards to buying a home.
Homeownership has long been touted as the American Dream as the process can help build security in the form of providing long-term shelter as well as a way for individuals to accumulate wealth by building equity. America is currently a buyers' market and plenty of folks from New Jersey to Australia are taking advantage of the plethora of opportunities. Potential borrowers looking to tap into the affordable housing opportunities are well advised to know the mortgage magic numbers that will allow them to easily transition into the realm of homeownership.
Credit Score Magic Number=730
Buying a home typically represents the largest financial commitment individuals make during their lifetime. Because of the large sums of money associated with the purchase of a property, most people have to rely on a mortgage provided by a private lender to fund the transaction. As a direct result of the mortgage meltdown, many lenders have implemented stricter guidelines for their mortgage underwriting process to help minimize their loss risk. Only those who have credit scores with a minimum ranking of 730 will be entitled to the lowest mortgage rates available.
Credit scores are a type of numerical ranking developed by theFair Isaac Corporation (FICO) that lenders use to gauge the overall risk of a loan applicant. The best home loan rates are reserved for consumers with the highest ratings. The credit scores range is from 300 to 850 and FICO bases its ranks on a mathematical algorithm and consumers who plan on working with private lenders to secure a loan, need to ensure they have a near flawless credit history and a high credit score.
Loan Length Magic Number=30-Year Fixed Rate Mortgage
The mortgage industry is proliferated with a large variety of mortgage opportunities. Adjustable rate mortgages, 15-year fixed rate mortgages and even Federal Housing Authority (FHA) loans are just a sampling of the offers, however, consumers who apply and qualify for a traditional 30-year fixed rate mortgage from a private lender, increase their odds of being the most successful in the quest for homeownership.
Regardless of what type of home loan a consumer is contemplating, experts' advise going through the application process for a 30-year fixed rate mortgage as the criteria for this mortgage is the strictest throughout the industry. Only individuals with the proper resources and money management skills (as determined by a credit score) to pass the guidelines associated with a 30-year fixed rate mortgage are truly prepared to take on the financial burden associated with homeownership.
Magic Number For Housing Costs=35 Percent of Pre-Tax Income
The days of over indulgence are long gone and now living within one's means is the most fashionable approach to budgeting. Before committing to a housing opportunity of any type, consumers need to compare their income to their monthly expenses and do the math to see if switching from renting to homeownership is financially possible. Lenders believe that 35 percent of pretax income is a fair allotment for mortgage expenses.
Depending on the purchasing scenario, the 35 percent allotment may be allocated to additional expenses associated with the home buying process. If a consumers’ budget can handle the expenses associated with monthly payments, discount points, closing costs and private mortgage insurance (when applicable) within that 35 percent budget, then that particular mortgage magic number is on the money.
