Outlined in this section is a simple guide to the mortgage
process. The tips provided can be helpful when learning
about the business of mortgages.
Getting
Started
Before you go very far in your quest for a new home, you'll
want to start off with a firm knowledge of how much home
you can really afford. As a general rule-of-thumb, you can
probably afford a house that costs up to two and one-half
times your annual gross income (that's before taxes). If
you are buying with a spouse or roommate, you can add in
their income for calculation purposes. But you'll need a
little more to go on than just that quick calculation. There
are a lot of other factors that will weigh into how much
home you can ultimately afford, such as how much cash you
have available for a down payment and closing costs, your
monthly income (before tax), and debt payments and credit
history.
Prequalification
Begin your shopping with confidence through a prequalification
program. Prequalification tells you how much mortgage you
are eligible to receive if your loan application is approved.
It shows sellers that you are serious about buying a home
- and helps you narrow down your search to homes within
your price range. I use a prequalification tool that provides
the most accurate results because it uses actual underwriting
rules, current interest rates and loan products available.
Know
What Lenders Want
Here's
an inside look at what lenders are looking for as they consider
your loan request:
Down
Payment - Your housing affordability hinges on the amount
of money you can come up with for the down payment and closing
costs. The larger the down payment, the lower the mortgage
payments.
Borrowing
limits - Earnings and debt. That's what lenders examine,
as they set your borrowing limits. Your mortgage payments,
property taxes, insurance and any other related fees should
not exceed 28% of your monthly gross income; this is known
as your housing debt ratios. Other debts, such as, car payments,
student loans and credit card are then added to your housing
debt. The sum of all debt, should not exceed 36% of your
monthly gross. If it does, don't panic. Remember, these
are only guidelines. We often approve loans that exceed
these ratios, as long as, the loan makes sense. These parameters
are for traditional loan programs - there are exceptions
- like FHA loan programs geared toward first time home buyers.
