Buying A House? How Much Home Can You Afford?Written by Carrie Reeder
Maybe you’ve heard expert advice that your debt to income ratio shouldn’t be more than 36 percent of your total income. But do you truly know what that means, and how lenders will look at your financial history in order to decide whether or not to extend you a mortgage? If you need help figuring out your debt to income ratio, simply follow guidelines below and soon you’ll know whether or not you’re in a position to apply for a mortgage loan.
Your debt to income ratio is amount of monthly debt you pay out in contrast to how much income you have coming in. Start by figuring easy part—your income. If you are on a structured paycheck, then it will be easy—simply calculate your monthly salary. If you work on a commission or other type of varying income, total your last six month’s earnings and divide by six.
Now you will need to figure your monthly debt. You should total your car payment, credit card payments (use minimum amount payments for this calculation, even if you pay more), any other monthly debt—such as child support payments—along with estimated amount of your new mortgage payment.
Buying A Home With Bad Credit - Tips On Finding The Right Broker Or LenderWritten by Carrie Reeder
You can buy a home with a bad credit record; you just need to find right mortgage financing package. Before you sign up with first company that offers you a loan, remember to research offers to be assured you are getting a fair deal.
Know Your Credit Rating
Your credit score is one of biggest factors in determining points you will pay for your loan. People with scores between 620 and 800 have near perfect credit and will have lowest rates and fees. Scores between 620 and 550 mean an interest rate or two higher. 600 is usually cutoff point for 100% financing. Scores less than 550 mean mortgage interest rates are up to 5% higher with up to five points. Lenders will also require a down payment between 5% and 20%
You can find your score online along with your credit report. This is a good time to make sure all information is correct on your record. Any discrepancies should be checked out and corrected before applying for a loan.
Know The Fees
Arm yourself with information so you will know what are reasonable fees for your type of loan. Mortgage brokers are paid for their work through points paid up front or through lifetime of loan by lender. Lenders also make money through points.