Showing posts with label debt-to-income. Show all posts
Showing posts with label debt-to-income. Show all posts

Friday, March 18, 2011

DEAR JENNY: Should I get pre-qualified before house hunting?


Absolutely! Even if you haven't so much as picked out houses to visit yet, it's important to see your mortgage professional first. Why? What can we do for you if you haven't negotiated a price, and don't know how much you want to borrow?

When we pre-qualify you, we help you determine how much of a monthly mortgage payment you can afford, and how much we can loan you. We do this by considering your income and debts, your employment and residence situations, your available funds for down payment and required reserves, and some other things. It's short and to the point, and we keep the paperwork to a minimum.

Once you qualify, we give you what's called a Pre-Qualification Letter (your real estate agent might call it a "pre-qual"), which says that we are working with you to find the best loan to meet your needs and that we're confident you'll qualify for a loan for a certain amount.

When you find a house that catches your eye, and you decide to make an offer, being pre-qualified for a mortgage will do a couple of things. First, it lets you know how much you can offer. Your real estate agent will help you decide on an appropriate offer, but being pre-qualified gives you the confidence to know you can follow through. More importantly, to a home seller, they won't have to wonder if they're wasting their time if you don't qualify for a mortgage to finance the amount you're offering for the home.

If you don't qualify right now due to income or credit issues, its best to know as early as possible so we can work with you to improve your situation.  Purchasing a home is a step-by-step process and preparation is the key.

Monday, January 24, 2011

JENNY'S TIPS: Understand Your Debt-to-Income Ratio


Your debt-to-income ratio is simply a way of determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met.

Debt limit

There is generally a debt limit associated with each type of loan, such as a 38/45 qualifying ratio for a conventional loan. These qualifying ratios are guidelines. An excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit.

Typically conventional loans have a qualifying ratio of 38/45, and FHA loan has 40/50. The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner's association dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

For example, with a 28/36 qualifying ratio:
Gross monthly income of $3,500 x .28 = $980 can be applied to housing
Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

Remember these are just guidelines. We’d be happy to pre-qualify you to determine how large a mortgage loan you can afford. We look forward to helping you buy your dream home.

Tuesday, January 11, 2011

SUCCESS STORY: Home Buyer with Low Credit Score Buys $284,000 House



A JENNYLOANS.COM SUCCESS STORY
Home Buyer with Weak Credit but Strong Rental History Buys House

One of our clients closed a mortgage loan today, even though his credit score of 619 is 21 points below most lenders' standards. This client is a perfect example of how planning, strategizing, and taking action helped him reached his goal of buying a new home. The process started 3 months ago when I evaluated his income, assets, and credit. They were living in a rental house with $1,400 rent and $400 utility bill. Even with a low credit score, we found several positive traits (lenders would call it "compensating factors"):

-Low debt-to-income ratio

-12 months verifiable rental history through cancelled checks

-401K available for down payment

-Good employment history

With all this considered, he purchased a house for $284,000 and is moving in today! Is your credit good enough to purchase a house? Not every situation is the same, but contact me and we can evaluate your options.