Archive for September, 2018

The 28/36 rule

What is a manageable mortgage payment? A rule of thumb among mortgage lenders is the “28/36″ measure of how much of your total pretax income goes to paying back loans: no more than 28 percent for monthly housing expenses( property taxes, homeowners insurance, homeowner’s dues, and mortgage), and no more than 36 percent for all debt ( car, home, student loans, credit cards). This “debt-to-income” guideline means on a 30 year mortgage of $180,000 at 4.5% will be a payment of $912 and you will need a household income of $52,000 to meet the guideline.

Banks also take into account the “loan to value” ratio of how much of your own money you are putting down. This assumption is that people will be more likely to keep up payments on a home that is worth more than the mortgage. The classic 20 percent down payment. Plus , you now have “skin” in the game.

Sign these Important Papers

Most Americans, regardless of age, avoid thinking about sickness or death with the hope that it will never happen. None the less one need to be practical in their thinking. Here are some important papers you must have completed.

Advance directive: A living will, a type of advanced directive, tells loved ones and medical personnel the treatment you want or don’t want should you be unable to speak for yourself due to accident or coma.

Durable power of Attorney for health care : Often included in an advanced directive designates your choice of who can make medical decisions for you when you cannot.( you may want to laminate this and put it in your wallet and/or hold it in an electronic storage that family members have access).

Will: With a Will you can head off potential family squabbles by spelling out who gets what. For those with asset values over $100,000 we always suggest a Living Trust that contains a Pour Over Will.

Durable Financial Power of Attorney: Not all of your assets can be in a Living Trust. If you are alive yet incapacitated, the only way a person chosen by you can access an IRA, pension or other financial account on your behalf is through this document. Many brokerage accounts have their own forms so better check with them to see if they are needed also.

This is just a start. In many cases you can get these forms online for a low fee. If you want to be certain you are doing it correctly in your state it is worthwhile to hire an attorney.