• Hillary C

How Much Do I Qualify For?


In order to start shopping for a home with confidence, it is very important to get pre-qualified. Here are the steps to do so: Read More. Whether or not you have spoken to a lender yet, you may be wondering how your purchasing power is determined. Well, I've outlined that for you here!

You may have already read the last blog post regarding the Four C’s in qualifying for a mortgage. This includes Capacity, Capital, Collateral, and Credit. Let’s assume you have the minimum required credit score for the program you wish to use, as well as a down payment ready for use. The main way lenders determine how much you qualify for is by calculating your debt-to-income ratio (DTI).

Debt-to-Income Ratio:

This ratio helps lenders measure your ability to repay. It measures how much debt you have compared to your income. The lower this ratio, the more comfortable the mortgage payment should feel for you. Each program has different requirement on how high this ratio can go. For general qualification purposes, let’s use the standard 43% maximum debt-to-income ratio.

Debt-to-Income Ratio Calculation:

DTI = all monthly debt including proposed housing payment / gross monthly income

Monthly Debt

This includes anything we would see as minimum monthly payments as per your credit report along with any alimony or child support. Other examples of debt include minimum credit card payment, car loan payment, student loan payment, other lines of credit, as well as your proposed housing payment.

Gross Monthly Income

This is your monthly income before taxes are taken out. Keep in mind, not all income can be used to qualify. It will depend on your employment history and employment type which is why it is important that a lender does a thorough pre-qualification before you start house hunting. Generally speaking, you will need a two year history of the income before it can be used to qualify, however there are many exceptions to this.

Example:

Let’s say a potential home buyer makes $84,000 salary each year. Her credit card bills leave her with a $75/mo minimum payment, a $330/mo car loan, and a $200/mo alimony payment.

The $84k salary means her gross monthly income is $7,000. Her total monthly debt is $605.

($7000 * 43%) - $605 = $2,405.

This means the potential home buyer can hold a mortgage payment of $2,405/mo to keep her DTI at 43%. If she found a home where the mortgage payment came out to $2,000 per month, that would make her Debt to income ratio 37.215%.

~ ($2000 + $605) / $7,000 = 37.215% ~

Let’s now clear up a common misconception. The purchase price of a property impacts affordability, however, it does not determine affordability. Every property and every purchase price will have a unique monthly payment so it is impossible to set a blanket pre-qualification amount. Instead, we set a price range to stay in with an understanding of what that should mean, approximately, on a monthly basis. If you are looking at condos for example, the condo fees are going to directly impact how expensive of a home you should be looking at.

For more information on what price point you should be focusing on, you can get started on the pre-qualification process here: mainstreethomeloans.com/hcochin

#Qualifying #DTI #homepurchase #GettingStarted

HC

This website is for informational purposes only. The information contained herein can change at any time, and there is no representation to the accuracy contained herein. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. Please note that the pre-qualification does not constitute a commitment or a loan approval but is instead a preliminary assessment of your current credit worthiness. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Main Street Home Loans is not a Financial Advisor, Tax Consultant or Credit Repair Company. Please make sure to consult your own Financial Advisor, Tax Consultant or Credit Repair Company regarding your specific financial situation. Veterans Affairs loans require a funding fee, which is based on various loan characteristics. VA 580 FICO – Purchases only, must have Automatic Underwriting System (AUS) approval. No cash-out under 600. On a USDA Loan 100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. On FHA loans, LTV’s of up to 96.5% for FHA loans. FHA 580 FICO – Credit score below 600 requires Automatic Underwriting System (AUS) approval. Fixed rate loans only. W2 transcript option not permitted. APR describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate. The APR allows a borrower to compare costs of credit because it factors in term, interest rate and fees associated with the loan. Adjustable rate mortgages (ARMs) are home loans with a rate that varies. Your interest rate and monthly principal and interest (P&I) payments will remain the same for a defined initial period, then adjust annually when that initial period is over. During the adjustable period, there will be an interest rate cap that sets a limit on how high your interest rate can go. This product is primarily for a borrower with good credit (min 680 FICO) but a low Loan-To-Value (95% max). Debt-to-income ratios apply. Investment condominiums not allowed. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan. Down payment assistance programs may require an educational class be taken. Down payment assistance programs are typically second mortgages that require the borrower to apply for a first mortgage. Testimonials appearing on this advertisement and Zillow, Yelp, Facebook, Twitter or other social media outlets are individual experiences of those who have used our services. Main Street Home Loans. does not provide incentives for testimonials or reviews. Any customer reviews on or before February 5, 2019 are for services performed prior to employment with Main Street Home Loans. MLO licensing information: DC MLO143670; VA MLO-740VA; MD 5762. Main Street Home Loans is a Division of NFM, Inc. NMLS 2893. NFM, Inc. is licensed by: DC # MLB2893; Virginia Mortgage Lender and Broker, Licensed by the Virginia State Corporation Commission # MC-2357; MD # 5330. For NFM, Inc.’s full agency and state licensing information, please visit www.nfmlending.com/licensing. NFM, Inc.’s NMLS #2893 (www.nmlsconsumeraccess.org). NFM, Inc. is not affiliated with, or an agent or division of, a governmental agency or a depository institution. Copyright © 2019.

 

NMLS: 1131858  - Check My License Here

 

© 2019 by Hillary Cochin. Proudly created with Wix.com. Privacy Policy