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Mortgage Qualification: 5 Factors That Determine How Much Mortgage You Can Qualify For


Mortgage Qualification Factor #1: Know Your Credit Score. Beef it up.

This is the single biggest mortgage qualification out there. Why? Because it's proof that you can pay back what you owe. Your credit score is the combination of all of your loans, credit cards, and your payment histories. If you haven't got all your ducks in a row, there are all kinds of tools out there to help you when you want to improve your credit. The most simple goal to aspire for is to make sure you're making payments on time, and that no bill collector is trying to collect on things you owe. Credit is complicated. The first thing to do to get bad credit back on track is to check your credit reports through the main credit companies: Equifax, Experian, TransUnion; Get everything you owe paid up-to-date. It can take a while for your credit to clear out, so the goal is to be vigilant. The best way to raise your scores is by establishing your credit history through a single lender with a small debt while building savings and assets. Another huge factor for your credit is your current income. BOTTOM LINE: With a high enough credit score, you can secure much lower interest rates on your mortgage than someone with poor credit.

Mortgage Qualification Factor #2: Loan-to-Value Ratio

loan It wouldn't make any sense to put a huge chunk of money down on something that was never going to bring a solid return on your investment. Imagine if your friend had a bike that sold at the local big-box store for $125, but they needed to borrow that amount from you to purchase the bike. You don't know if they're ever going to be able to completely pay you back, but you can take their bike if they don't pay you- the catch is, you can only expect to sell it for 50 to 75 percent of what you spent on it. This means that you'd automatically take a $40 to $62.50 loss if your friend doesn't pay you back and you end up taking the bike. If this friend was a good friend, you might invest the money in him/her to get a nice shiny bike, but most mortgage lenders aren't there to be your friend - they're there to make money. This is why mortgage lenders use a ratio called the Loan-to-Value Ratio to establish a person's credit. Obviously, this isn't the only factor that a mortgage lender is going to use, but larger loans are seen as a larger risk (this can be said of smaller loans too) and therefore bring higher interest and payments. BOTTOM LINE: If the house you really want is going to require you to take a mortgage over 75% you should probably consider another house.

Mortgage Qualification Factor #3: Debt-to-Income Ratio

America is all about working and proving your livelihood to improve your lot in life. Plus, you have to expect to grow and expand if you want to raise a family, be successful and expand your life. If you haven't got these expectations for yourself, don't worry the bank does! Typically speaking, when you're looking to get a mortgage, you should have a debt-to-income ratio around 43% or lower. What debt-to-income ratios show lenders is how you are personally able to manage your payments on the money you've borrowed in comparison to your finances that you earn. A rough example of this is to assume you're paying $1,000 a month on your mortgage, $200 on your shiny new car, and another $800 for all of your other debts (school loans). Take the sum total ($2,000) and divide it by 0.4. You should make this amount (in our example it's roughly $5,000 a month) for a bank to give you the best deal on your mortgage. If you don't, the bank might still give you your mortgage, but it won't be a qualified mortgage. BOTTOM LINE: Cut out your extra debts or increase your income to get the bank on your side when you're looking to get the best mortgage out there.

Mortgage Qualification Factor #4: Housing Cost-to-Income Ratio

mortgage-qualification- You don't buy a car without expecting to change a few parts after years of owning it, why would you do any differently with your home? Lenders see houses as huge investments. They assume your goal is to make an investment that makes you money and this requires you to take all the necessary steps – paying your mortgage principal, your interest payments, property taxes, hazard insurance, mortgage insurance, and fees. If all this exceeds over 28% of your income, you'll probably have to find something more affordable. Banks or lenders might still lend you money, even if your front ratios are too high. These types of negotiations typically require co-borrowers to lower initial payments, but if you have a mortgage that's too high and you can only afford to pay the bare minimum because of your debts, and housing costs aren't low enough compared to your salary, you're going to find yourself swimming in a debt that just keeps getting bigger and bigger. BOTTOM LINE: You might forget about your bills and expenses, but banks don't. If you aren't making enough so that your salary is higher than projected housing costs, you might have to look into something more affordable.

Mortgage Qualification Factor #5: Down-payment Amount

A down payment is your ace in the hole. The more cash you can put down, the lower your payments are going to be, which plays a huge factor in deciding your other ratios. A good rule of thumb is to try and put a sizable chunk into the amount you're trying to borrow. It helps to consider the principal of your loan, and the amount of time that you plan on taking to pay it back, plus sometimes lenders will give you additional incentives when you put money down in the form of rebates, that can definitely add up over the long run. BOTTOM LINE: The best thing to do is to try to put down 20% on your initial mortgage. This means if you're trying to borrow $100,000, you should aim to put at least $20,000 in. Not only will you get lower interest rates, your payments will be drastically smaller. If you can't pay 20%, experiment to see how lower amounts of down-payments can affect your costs.
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Nearly 2 million homeowners no longer 'seriously' underwater on their mortgages

Surging home prices have helped nearly two million homeowners get back above water on their mortgages over the past year.

During the first quarter, 9.1 million, or 17%, of homeowners were seriously underwater on their home, meaning their debt exceeded the home's value by 25% or more, according to RealtyTrac. That's down from 10.9 million, or 26%, of all properties a year earlier. States with the highest percentage of seriously underwater homes included Nevada, Florida and Illinois. Read full article at CNN
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Your Guide to a Smooth-Running Construction Project

Imagine walking into your newly built or remodeled home and seeing it exactly as you had imagined it at the start of construction: the windows are all in the right places, the flooring is the right color, and the kitchen cabinets are a perfect fit.

Now allow me to pinch you on the arm, because for most people, reality is often different from that idyllic scenario. You might see missing trim around the bedroom doors or wonder why that small change in the kitchen cost so much. Looking back, you might ask, “And why did we have to hire another subcontractor to finish the bathroom?”

Of course, there are things you just can’t plan for, but there’s plenty that you can. Costly changes and additional time-consuming work can be kept to a minimum if you fully understand what you are building before you start. By understanding the construction process, being part of the team and keeping a firm grip on the budget, your construction project can result in the home of your dreams.

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Putting the Recession in the Rearview: Home Values at or Near Peak Levels in 1,000+ US Cities

Home values in more than 1,000 cities and towns nationwide either already are, or soon will be, more expensive than ever, erasing any losses in value experienced during the recession, according to Zillow.

U.S. home values climbed 5.7 percent year-over year in the first quarter, to a Zillow Home Value Index of $169,800. National home values have climbed year-over-year for 21 consecutive months, a steady march upward that has helped put the housing recession almost entirely in the rearview mirror in 1,080 of the more than 8,700 cities and towns covered by Zillow. In these areas, home values are already at or expected to reach pre-recession levels in the next year, including in many hard-hit areas. Among the 6,781 cities and towns covered by Zillow that experienced home value declines of 10 percent or more during the recession, values in 527 have either fully recovered or are expected to recover fully by the first quarter of 2015. Read full article at Zillow
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Home-Equity Loans: What You Need To Know

Home Equity Loans, commonly referred to as HELs, can be your best friend or your worst enemy depending on how wisely you manage them. Just like any other major decision, you should consider the Pros and Cons of each type of HEL. There are benefits for consumers and benefits for lenders. Understanding how those benefits will affect you is important before diving into a Home Equity Loan. Read More At: Investopedia.COM.