PREQUAL.WK1

This Lotus 1-2-3 template will help you determine the maximum home
purchase price and loan amount that your finances will allow.

Instructions:
From Lotus 1-2-3 or a compatible spreadsheet, load (/FR) worksheet
"PREQUAL.WK1".  You will see one page of information that contains
all input and result areas.  If you wander off this area, you may
return by pressing the [HOME] key.

DATA ENTRY:

All figures in the first column of numbers (Col B) are intended to
be monthly amounts.  Income is defined by most lenders as that
ongoing income that can be supported with a two year history.  If
you are salaried and just got a raise, use your new rate.  If you
got a substantial bonus for the first time this year, do not count
it.  Self-employed and commissioned individuals should use a 2 year
average of income, NET of any job-related expenses.  If there is
more than one wage earner being considered, put the higher income
in "Hi income".  Other income would include interest and dividend
income that will continue after the purchase, or second jobs that
have a two year history (part-time instructor, etc.) use an average
of the last two years to calculate monthly amounts.

Debts to be listed would include any auto loans, revolving (credit
card) accounts, installment loans (fixed amount each month) and
other obligations.  List the MONTHLY payment.  For credit cards, it
is customary to consider 5% of the outstanding balance to be the
minimum monthly payment.  Installment loans would include furniture
loans, credit union loans, etc.  It is not necessary to include an
installment debt that will be paid off in less than 6 months. 
Other debts would include Child and Spousal Support, and any other
obligation with an ongoing commitment.  Do NOT include as debts any
insurance (auto, life or health), charitable contributions, rent,
utility payments or any mortgage loans that will be paid off. 

At the top of the second column, show all the cash that is
available TO BE INVESTED IN THE PURCHASE.  One of the biases of
this program is that it spends ALL your cash.  Keep some for
reserves, at least 1-2 months payment.  If will have $35,000 total
cash, tell the program you will have at most $33,000.  If you want
to pay off some bills, make sure you don't count the cash twice.

List the number of dependent children at home (or leave blank).
List Marital Status 1=Married 0=Unmarried

Adjust the interest rates if necessary.  The Sunday Real Estate
section and Monday Business section of the CC Times and SF
Chronicle usually have listings of Fixed and Adjustable mortgage
rates.  It is best to use rates from the largest institutions, ie
B of A, Wells Fargo, First Nationwide, etc.  Some of the lowest
rates quoted by small lenders are not dependable.

The third and fourth columns will give your results.  Loan Amt.
shows how large a loan your income and debts will allow you to
qualify for (subject to minimum cash requirements) and the Sales
Price reflects the most you could pay for a home if you invested
ALL the cash listed.  Based on the results of the 5 options, a
maximum purchase and loan are detailed with required closing costs
(typical title, escrow and lenders fees), and expected prepaid
items (hazard insurance, property tax prorations, and prorated
interest).

The sheet you see on the screen is defined as the print range, so
if you want a permanent copy, just print (/PPAGQ).

The unique feature of this program is that it balances all factors
to give you the most purchasing power.  Most other prequalification
programs require you to guess at a sales price and see if you can
qualify, or base a loan amount only on your income without
considering how much you have to put down.  

Some limitations of this program include:

VA loans are not considered.

Income and expenses as interpreted by an underwriter may not be the
same as your opinion!

As down payments increase beyond 20%, additional flexibility may be
available.  this is not reflected in the program.

Credit history is not considered.


I welcome your comments, criticisms and suggestions.

Robert Ikenberry (415) 672-2632