How Much Home And Mortgage Do I Qualify For? |
Buying a home in today's marketplace is a bit intimidating and frustration. And your new home purchase and mortgage is likely to be one of the most important decisions you've ever had to make. It's most likely one of the single most valuable assets and investments you will ever own.
Where to Start
Before you invest hundreds of hours searching and to avoid any disappointment, if you find yourself unable to qualify for your dream home sit down with a lender. Your lender can perform a verbal pre-qualification in about twenty minutes and a complete pre-qualification in about 5 days.
Pre-qualification not only allows you to concentrate your search in the proper price range, but it can also give you an edge when competing with other offers on a home that you find. If a seller is deciding between two offers, they are much more likely to pick yours. The amount of home that you qualify for will be determined by three main factors: down payment, ability to qualify for a mortgage, and closing costs.
Pre-qualification not only allows you to concentrate your search in the proper price range, but it can also give you an edge when competing with other offers on a home that you find. If a seller is deciding between two offers, they are much more likely to pick yours. The amount of home that you qualify for will be determined by three main factors: down payment, ability to qualify for a mortgage, and closing costs.
Down Payment
Whereas a current homeowner can rely on equity from their home sale, a first time homebuyer is limited to the money they can save. The days of having to put 20 percent down on a home are in the past. Although putting a large amount of money down definitely makes it easier to qualify for a mortgage and to get the lowest interest rates available. With the various programs that are available today, you can put as little as 3 percent down on a home.
Qualifying for the Mortgage
There are two basic guidelines that lenders use to determine what size mortgage you are eligible for:
1. Your monthly mortgage payment of principal, interest, taxes and insurance (PITI) should not exceed 25 to 28% of your monthly gross income.
2. Your monthly housing cost (PITI) plus other long- term debt should not exceed 33 to 38% of your monthly gross income.
Specifically, most lenders will consider 4 key factors to determine your ability to qualify for a home loan:
Income - This first element can include not only your gross monthly income and secondary income (commissions, bonuses) but also your history of employment, stability of income, education, even potential for future earnings. Underwriters are looking for a average history, when there are fluctuations in the monthly amounts of income earned.
Credit History - This encompasses your history of debt repayment, total outstanding debt, highest balance, and your highest monthly debt balance.
Assets - Your assets consist of cash on hand, savings and checking accounts, CDs, stocks, bonds or any other type of liquid asset.
Assets - Your assets consist of cash on hand, savings and checking accounts, CDs, stocks, bonds or any other type of liquid asset.
Property - The home you are planning to purchase will be appraised to determine the market value. The estimated value must be sufficient to secure the loan. Lenders will loan you no more than a certain percentage (usually 95% Conventional, 97% FHA, 100% VA) of this value.
Closing Costs
Keep in mind that in addition to your down payment, you will also be responsible for paying fees for the loan and closing costs. These will be required at the time of closing unless you qualify and choose to have these included in your financing.
Closing Costs generally will range between 2 percent and 6 percent of mortgage loan, depending on the loan and lender. You will be provided with a "Good Faith Estimate" of closing costs so you can know what to expect.
"Points", which are one time charges equal to one percent of your loan amount, may be required by your lender at closing. (Never agree to more than a 1% origination fee unless you understand exactly why it is over that amount.)
Your closing agent will charge a fee at the close of the sale.
We sincerely hope this information will help you gain a better understanding of the mortgage process.
Visit http://www.urdollars.com for other articles related to mortgages or the blog at http://www.JerryWWilliams.blogspot.com and subscribe to a great newsletter at http://www.JerryWWilliams.com Jerry W Williams is a seasoned professional and has worked for some of the top mortgage/banking instutitions in the country. Mr. Williams has "expert status" on ezinearticles.com. Article Source: http://EzineArticles.com/?expert=Jerry_Williams |
