Things To Consider Prior To Purchasing Tampa Real Estate

Most families and individuals seeking to purchase a Tampa real estate property tend to focus on how much they qualify for based on what a lender will tell them.  It is important to know that Tampa mortgage lenders utilize qualifying ratios based on an applicant’s debt or liabilities listed on a credit report. As we all know, life may provide us unexpected turns and events that can change how we live our lives moving forward. If certain aspects of the unexpected are not taken into account while purchasing a Tampa home, you may be asking for trouble. Below you will find a step by step guide on how learning about your spending habits and reviewing the possibility of job loss, can help you make a wiser decision while purchasing a new Tampa real estate property.

Traditionally, a Tampa home purchaser would contact their bank or Tampa mortgage broker to learn what their qualifications may be.  Prior to doing so, a Tampa mortgage applicant should do their homework and learn more about themselves and what they would feel comfortable paying on a monthly basis.

The first thing that Tampa real estate prospects should prepare prior to requesting a Tampa home loan pre-approval is a monthly expense report. Take a few hours to assemble your credit card statements dating back 12 months, cash receipts, utility bills, cable expense and so on.

The idea is to learn more about YOUR spending habits. We all utilize our funds in different formats. Some people allocate additional funds towards their car, entertainment, cigarettes, hobbies or even pets.  After you’ve determined what your average monthly expenditures are, simply subtract your monthly net income to receive a monthly “spare” dollar amount. This amount typically represents your maximum monthly housing expense figure. Keep this "spare" dollar amount in mind, as we will refer to it later.

Next, a Tampa real estate prospect should take a moment to think about their existing career and where they see themselves in the next three, five or even ten years down the line.  For example, if an applicant has been working for a company for two years, a Tampa mortgage lender may consider that sufficient to consider them a stable employee or applicant. But what happens if that applicant has been miserable at work for the last year and has been contemplating leaving that company for another? This is not uncommon considering we are in a recession and people are working harder for LESS.  So before purchasing a home, one should look forward three, five or even ten years and determine if they are happy doing what they are doing and if their company will likely remain in business for that period of time.

Your existing expenses and career situation are items which could possibly be controlled to some extent. The next factor in the process is called the “unknown expense”. This includes unexpected expenses such as: car needs a new transmission, unexpected surgery with a co-pay of 20%, loss of wage or even job, property insurance increases after the Tampa home purchase, etc.  While we cannot determine when or if they will occur, it should be taken into consideration.

Once you have determined: a) what your average monthly expenses are, b) you’ve reviewed your existing career, as well as employer and c) have considered the possibility of the “unknown expense”, you are ready to move forward.

Ok, so let’s bring that “spare” dollar amount from our first step back in to the equation.  Hopefully, you have a better idea of how your “spare” dollar amount may not necessarily be what you should use to determine what you qualify for. Do understand that most Tampa mortgage programs utilize secured and unsecured liabilities that are reported to the credit bureaus in the qualification process. Meaning your car loan, credit cards, etc. If you do not use a credit card or do not have a car loan, they will assume you have very little debt. Obviously, this may not be the case.

A great way to learn what a comfortable mortgage payment may be for Tampa real estate prospects is to try the following steps:

• Figure out what your “spare” dollar amount is. (Discussed earlier)

• Analyze your job situation and determine if your income is at question.  Even if you feel it isn’t at question, you may still want to implement this step. Ask yourself, “What income could I expect to earn in another position, if I where to lose my job today?” Take that figure, which most likely will be less, and divide it by your current income and then subtract it by 1.

For example: If your current net monthly income is $3,500 and a job replacement will provide you with approximately $2,800 in revenue, your monthly net income has decreased by 20%.

$2,800/$3,500 = .8
.8 – 1 = .20 (20%)

• The “unknown expense” should be considered and collected for on a monthly basis.  The amount set aside, usually in a savings account, may depend on the family or individual’s particular situation. Five to ten percent of the monthly net income may be considered a reasonable amount for this purpose.

Now that you have determined what your potential decrease in income may be and what a reasonable amount to set a side for the “unknown”, simply proceed with the following:

• Add your income differential & saving percentages together to obtain a total %

For example:  If you take your (20%) potential loss of wage plus a (10%) savings for the unexpected,  this will give you a total of 30%.

• Now subtract X (total %) by 1,  and you will receive your new “final” X (total %)

In our example we would simply subtract .30 (30%) by 1. This will give us .70 (70%)

• To complete the process, now take your existing monthly “spare” income and multiply it by the final %, to receive your new “spare” dollar amount.

$3,500 net income
– $1,400 monthly expenses
$2,100 “spare”
X  .70_
$1,470

So your new “spare” dollar amount equals the adjusted maximum monthly housing payment. Take this monthly figure and visit your local bank or Tampa mortgage broker, and have them tell you what the maximum loan amount will be for that particular payment.

While we do not know what life brings us down the road, follow these steps and you may find yourself in a better position if the time does arrive. Taking out a Tampa mortgage without considering the "unknown" may come back to hunt you in the end.

If you are in the market for a Tampa home and are seeking home financing, I urge you to try these steps so you can gain valuable insight on your spending habits and how they may be affected with a new Tampa mortgage.

If you are interested in learning more about the Tampa real estate acquisition process or perhaps would like to learn more about your home financing options, please contact Rick Durand at (813) 695-3077 or schedule your complimentary consultation today.