When should you go for a mortgage? Check out yourself

Have you taken out credit cards, personal loans or an auto loan? If you have high interest credit cards, consider paying them down and avoid using more than 10% of your cards' limit at any given time. However, if you are debt-free, you can possibly go for a bigger mortgage depending upon other factors. You may be saving for your retirement by investing into employer sponsored plans like 401k/403b as well as the IRAs. You may like to save for your child's education (Coverdell education Savings and 529 Plan) as well. So, decide whether you're comfortable with managing a mortgage as well as savings plan.

However, if you have too much of credit card debt, pay it off and then start saving for future. Otherwise, managing credit cards, savings and then a mortgage may be quite difficult!

If you're looking for mortgage in a market where borrowing is costly and difficult, then having poor credit will cost you a lot. In such markets, a borrower with a score of 620 is no longer considered creditworthy! At least you should have a score of 680 to qualify for better rates and terms.

Although there are FHA and VA programs for those having poor credit, yet, if you want to get the best program and avoid mortgage problems in future, then wait till you repair your credit and then apply for a loan.

Often lenders take the initiative and work with borrowers in improving their credit scores prior to offering the loan. However, if your score is between 640 and 680, consider putting down 10-15% of purchase price so that some of the best programs are available to you.

As for the credit history, most lenders look for 3-5 tradelines (mortgage, second mortgage, credit cards, auto loan, student loan, store card, gas card, secured/unsecured installment loan etc) in good standing for the past 2 years.

Most lenders will require you to have cash reserves/savings equal to at least 6 months of mortgage payments (PITI) apart from what you'll pay for closing costs and down payment.

However, not all programs (such as the FHA loans) require this but it's better to have some cash reserves so that in case there's an emergency you don't miss a payment and bring down your credit score.

In order to take on additional debt, you'd have to calculate how much of your income (include all sources of income) is being spent on current debts such as credit cards, personal loan, auto loan etc. This is given by the debt-to-income ratio or DTI.

The DTI = (total monthly debt payment/gross monthly income)
So, the % of income put into paying off debts = DTI * 100

Check out yourself the DTI using Debt-to-income Ratio calculator.

The higher the DTI, the lower are your chances of getting a mortgage because you pose a higher risk to lenders if you're already having a lot of debts to pay for.

If it's a declining market with home prices going down, you may like to wait till prices get better. This is because lenders may reduce the loan amount as investors won't provide enough funds.

Moreover, if you cannot pay off the mortgage and decide to sell the home, you won't get enough proceeds because the home value will turn out to be lower than what you owe. Thus, in a declining market, you can't rely on home sales to pay down your mortgage. Rather you'd have to choose options which will have a negative impact on your credit.

However, if you're planning to occupy the house for a long time and your finances are in good shape, you may go for a home that's losing value now as you have the time to wait till prices get higher.

The lending industry has been changing with time to keep pace with inflation and economy. With market changes and scenarios like the credit crunch (due to sub-prime mortgage crisis in 2007), lenders have come up with stricter lending guidelines in order to reduce the rising rate of foreclosures.

Due to market changes, certain programs are simply not available. For example, due to the rising concern over foreclosures (in 2007-2008 beginning) and borrowers' inability to pay off loans, lenders have almost stopped offering 100% financing or 80/20 loans.

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'Net zero' house to be built in Maryland should produce as much energy as it uses

It sounds like an idea out of a sci-fi novel: a house that can produce as much energy each year as it uses. But most buyers aren't interested in houses from a sci-fi novel, and they aren't much interested in paying extra for them, either.

But a test house about to be built on a federal research site in Gaithersburg is designed to look like a typical home in the Washington area, and its inventors are going to great lengths to calculate how well the normal-looking sci-fi house would generate and consume energy when occupied by a family of four.

Groundbreaking is set for March 25, and construction is to begin in March or April, with completion expected in 15 months. Gaithersburg-based commercial builder Therrien Waddell Construction Group is the contractor, working with residential builder Bethesda Bungalows, which focuses on high-end "green" building.

The four-bedroom, three-bath house will be built with the latest in energy-efficient techniques and technology - plus redundant alternative-energy systems that will be tested later. It was designed by Building Science Corp. in Somerville, Mass. The two-story bungalow could be right out of Takoma Park, Hyattsville, Bethesda - or from Bethesda Bungalows' new-project files.

The 2,700-square-foot wood-framed house with detached, electric-car-ready garage will sit on a small hill on the north end of the campus of the National Institute of Standards and Technology, near Clopper and Quince Orchard roads. The location is next to the institute's engineering lab, where 50 or 60 scientists in the building environment division will monitor how the energy-saving technologies work when the home is in use. The $2.6 million research project was funded through federal stimulus money, after two years of preparation and design.

But no one will really live there. Instead, scientists will track what happens with a simulated family of four. "To simulate the family, the showers, toilets, lights and appliances will actually be turned on and off by computers . . . located in the detached garage," says A. Hunter Fanney, chief of the building environment division. "The computers will send signals to every device in the home to control its operation. In the case of water [used in the showers, faucets and toilets], the computer will actually open and close the water valves to extract the correct amount of hot and cold water."

Other automatically cycled appliances include a range with oven, a washer and dryer, microwave, dishwasher, and refrigerator with a door that opens and closes regularly.

Standing in for the parents and two kids, to generate body heat that will be factored into the energy-usage equation, "we'll have people simulators - devices that are similar in appearance to little hot-water heaters that will give off heat and moisture to simulate humans" in every room, Fanney says.

The "people" will be turned on and off on schedule, too. The two heaters in the master bedroom and one in each of the kids' rooms will go on at night when they're "sleeping" and off in the morning when they leave for work or school. Units in the bathrooms will cycle on and off, as will heaters in the family room, dining room and kitchen.

The house also will have a 1,518-square-foot basement, complete with people simulators.

If the notion of human simulators and computerized utilities sounds cutting edge, it is. But Fanney says much of the "net-zero" building approach is within many homeowners' grasp. Betsy Pettit, president of Building Science Corp., who served as the architect and building sciences consultant, agrees.

"In most buildings, you can lower energy usage by 40 to 50 percent by using existing off-the-shelf technology, if it's selected properly, installed properly and maintained properly, and attention is given to detail," Fanney says.

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