The Tenet of Transparency

By the time I started dating Will in 1994, he and I were pretty clear about what we valued in those we hold dear. Chief among those values were honesty and transparency. Those first few weeks were full of “So, I ought to tell you…” conversations. We quickly learned we trusted each other and could move forward knowing that transparency would be a cornerstone of our marriage.

Untitled design

Our business is like most. Our profit margins vary depending on projects, timing, and market. It is easy to feel protective of information about margins, fearing customers will perceive them negatively and that contractors and competitors will judge them. However, we also know our product is a unique purchase for most of our buyers. When people are buying a home, not only are they making a large financial investment, they are investing in the lives they are creating for their families. We work hard to build exceptional homes for those lives. By being transparent with our numbers, we can actively demonstrate that hard work.

We want those doing business with us to know we are an open book. To that end, we promise to share all of the information a buyer seeks: transparent budgets that include our fees, thorough walk-throughs during all stages of construction, and candid and respectful input about design and selection choices. We want buyers to move forward knowing that transparency will build trust and joy in their new home.

 

Financing Your Home?

Financing

When buying or building a new home, the first thing you need to do is determine how much home you can actually afford. Your mortgage lender uses a number of ratios, lifestyle factors and your credit history to decide the maximum mortgage amount they will lend to you.  Here is how you can get an idea of what that amount will be, before you talk to your mortgage broker.

 

DtoInc

The debt-to-income ratio is the percentage of your monthly income that goes toward paying off debt.  This considers debt such as school loans, car loans, credit cards, etc.

For example, if you have $2,000 in debt payments a month, but your monthly income is $10,000, your debt-to-income ratio is $2,000/$10,000 = .20 or 20%

The lower this number is, the better, as this percentage is combined with other ratio results to determine the full amount of debt you can take on.

housing

Lenders prefer that your housing costs (principal, interest, taxes & insurance) not take up more than 28% of your pre-tax monthly income. This is the housing ratio.

back-end

This is the ratio combines the previous two percentages.  It is the ratio of all your debt + housing costs vs. your monthly income. Lenders prefer this to stay around 36%.

It is important to note though, that these ratios are not set in stone. The “qualified mortgage rule” allows for legal protection of well-documented mortgages with a back-end ratio of up to 43%.

credit

If you have a good credit score (740 or above), you will likely receive a low interest rate on your mortgage loan, allowing for you to take out a larger loan.

downpmt

If you have a large down payment, then the amount of the borrowed loan decreases, meaning you can purchase a more expensive home. There are a variety of acceptable down payment percentages.  Some lenders allow for a down payment of as little as 3%.

lifestyle

There are other factors that your lender does not always take into account.  Do your children attend daycare or private school?  Do you belong to a country club? Or do you like to dine out often?  These are large expenses that a lender may not consider when formulating your approved mortgage amount.

 

All of these things are useful in determining how much home you can afford.  You know the full extent of your current monthly commitments, and it is important for you to keep these in mind and choose a monthly mortgage payment that you are comfortable with. Staying realistic will help you in the long run and let you live the life you are most comfortable with.