Friday, October 26, 2012

How Much Can I Qualify For?

The top two questions we've been asked this past week are: "How big a mortgage can I qualify for if I make X amount of money?" and "How big a mortgage can I qualify for if I have X amount of debt?"

The two questions are really related because the amount you qualify for is based on the ratio of your debt-to-income.  Here's how you figure it out:
  1. Add up the total housing payment for the mortgage you are trying to get.  Add together the monthly principal, interest, taxes, homeowner's insurance, and any mortgage insurance and HOA fees.
  2. To the sum above, add the minimum monthly payments that show on your credit report.  This number is your total monthly debt for mortgage approval purposes.
  3. Divide your total monthly debt by your gross monthly income.  This will give you your debt-to-income ratio (DTI).
  4. Once you know your DTI ratio, then you can tell which kinds of loans you can qualify for.  The maximum DTI for a conventional loan is 45%, and the maximum DTI for an FHA loan or a VA loan is usually 50% or slightly higher, depending on the lender.
As you can see, you need to know a lot of information before you can say how much you qualify for.  At a minimum, you need to know your gross monthly income (income before taxes) and you need to know what shows on your credit report.  Your credit report does not show everything you owe each month, so don't make the mistake of guessing what's on your credit report.

The only way to know for sure how much you can qualify for is to let a competent lender figure it out for you.  We've got a great suggestion on who to call if you're looking for a competent lender: call us! 

Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!

Make sure you check out our web site:

By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

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