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Sydney Gunter. House Hunter.
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Loan Checklist

Factors To Consider When Applying For A Home Mortgage

 Owning a home can be a sign of independence and success. It allows you to build up equity and the mortgage interest and property taxes are tax-deductible. What can you do to make a home affordable for you?

Reputable lenders look at a list of criteria to decide how much they’ll loan you.

This List Includes:

  • Credit score
  • Existing assets including cash
  • Car leases or loans
  • Credit card balances
  • Debt consolidation loans
  • Home equity loans
  • Installment loans
  • Student loans
  • Other monthly debts
  • Size/source of your down payment

If you’d like to get an idea of what you can afford before talking to a lender, here are a few tools you can use to decide whether a home is within your budget.

Here Are Some Guidelines:

  • As a rule of thumb, your house hunting budget shouldn’t be more than 2.5 times your pre-tax annual income. If you earn $50,000 a year, your budget for house hunting should be around $125,000.
  • Your Housing Expense Ratio, which is principal, interest, taxes and insurance shouldn’t be more than 25% to 28% of your pre-tax monthly income.
  • Your Debt-to-Income Ratio should be no more than 36% of your pre-tax monthly income. This is the ratio between how much you owe and how much you earn.
  • Use an online calculator to figure how much home you can afford.

“Qualifying for” and ”can afford” are two different things. Shopping for a home within your budget will save you a lot of heartache now and in the future.

If you’d like help determining how much mortgage you can really afford, call your trusted mortgage professional today.

Documents required vary from loan to loan, but generally the following are required, often for up to two years back:

  • Statements of income such as W-2′s, pay stubs, and financial statements
  • Bank statements
  • A list of any assets that you own
  • Rental or mortgage history
  • Employment history and current information
  • Personal identification, including Green Card if applicable
  • Purchase contract
  • Other pertinent items such as: Bankruptcy Discharge Notice or Divorce Decree
  • Loan application

 

 

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