Copyright Online Info, Inc. All Rights Reserved.
Lets Start with Your Credit Rating
If you have had credit problems though, you should discuss them with your mortgage professional. There are legitimate reasons at times for having had credit problems. If they have been
dealt with and you presently have a satisfactory credit record (for at least 12 months or more), you will likely still qualify for a mortgage.
If you have every used a credit card or had any type of loan, you have established a credit rating. Your credit rating is of prime consideration when you wish to buy a home. However, don't
panic if you do not have a perfect credit rating. It still may be adequate enough to qualify your for a mortgage.
How is My Credit Rating Determined?
The first step in the loan process is the credit check. This is very important as it gives the lender a fairly clear picture of your track record with loans and any problems you may have had with
payments.
Capacity simply means your financial capacity or ability to repay the loan. You need to have enough income to pay your monthly mortgage payment and still have enough to live on.
Capacity is determined by adding your housing payment (mortgage + property tax + insurance) to your other monthly debts such as credit card payments, car loans etc. and then dividing that
sum by your gross monthly income.
This is called the "Debt-to-Income" (DTI) ratio. A debt load of $1,500 per month divided by a gross monthly income of $4,500 would give a DTI of 33%. The standard guideline, sometimes called
the "Fannie Mae" guideline is that your total DTI should not exceed 36% but some of the lenders that we work with will allow that figure to go higher if there are other compensating factors such
as a large down payment and an excellent credit history.
Collateral is the term used to describe the value of your property which you are "pledging" to ensure your payments of the loan. Lenders will require an appraisal to verify the value of
your property to ensure that they, the lender, will not incur a large cost if any, if you default on your mortgage payments. The lender will seize the property and sell it to pay the remaining debt.
Character is a phrase that describes a subjective determination of your over-all financial situation. The underwriter will look at your job stability, your likelihood of continued
employment and your proven track record of handling money and credit wisely.
Your credit-worthiness is determined by your income, payment history, debt payments and of course any bankruptcies. Other determining factors in addition to Credit are Capacity, Collateral
and Character.
Click here for the Top Mortgage Brokers Lenders in your area