The best place to begin your home buying journey is to figure out just how much you are able to afford. All other decisions should be based on that answer. Let’s take a look at what lenders pay attention to when deciding whether or not to provide you with a loan.
The Importance of Getting Pre-Approved
Once your budget is determined, it is critical to get together with a licensed mortgage professional to get pre-approved. A pre-approval lets both you and the lender know exactly how much you are qualified to borrow for a house. This enables you to refine your home search to houses within your means, provide you with a solid idea of the amount you should have for a down payment, and help you discover budgeting goals to strive for.
How is my Loan Amount Determined by my Lender?
To establish the mortgage you can qualify for, a lender will evaluate your credit, earnings, assets, and financial obligations.
They will also consider two important ratios.
LTV is calculated by considering the amount you are borrowing in comparison to the valuation on the home. The lower the LTV the better since it signifies a smaller amount of risk to your lender. Increasing your down payment can lower your LTV
DTI reveals what amount of debt you currently have when compared to your monthly income. This debt incorporates credit card bills, auto loans, alimony or child support, and other regular monthly payments you make.
Your chances of qualifying for a loan are significantly greater with a lower DTI
Being aware of what you can manage to pay every month for your mortgage will prove helpful when you start your search for a new home, together with your credit, LTV, and DTI your budget and loan amount can be determined.
Experienced Chief Operating Officer with a 20 + year demonstrated history of working in the banking industry. Skilled in all aspects of the residential mortgage market . Strong business development professional with a Bachelor of Science (BS) focused in Business Administration and Management, from St. Joseph College. A direct endorsement underwriter and a licensed Mortgage Loan Originator.