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Keyword; qualification for a home loan in Plano
Are you thinking about a mortgage in Plano?
As one considers upgrading from a house owner to a homeowner in Plano, there are factors to put into consideration. These factors may affect one’s ability to access a home loan. This article provides an overview of how such factors may affect your viability for a mortgage.
One key factor is your loan to value ratio or otherwise known as LTV. This refers to the measure of equity in your home. The higher the equity, the more you are able to borrow. LTV is determined by subtracting your down payment from the value of the property in prospect then dividing the difference by the value of the property, multiplied by 100% i.e if the value of the property is $200,000 and the down payment is at $20,000, then LTV=[$200,000-$20,000] divided by $200,000 multiplied by 100% thus setting it at 90%. This ratio helps to determine the minimum down payment. If your LVT is higher than the maximum limit, you may have to increase your down payment or source for a cheaper property. Maximum LVT is determined by the type of property, loan amount, and whether or not you are a first-time homebuyer. However, if you pay less than 20% of the principal amount as down payment, you will have to pay mortgage insurance.
Secondly, there is a need to determine the amount you can comfortably be able to pay every month given your total monthly income. This is enabled by calculating your debt-to-income ratio whereby a total of all your current monthly debt is added to what your home loan monthly repayment will be. The sum total is then divided by your gross monthly income and multiplied by 100%. Your DTI helps to ensure that you can comfortably repay your loan currently and in the future and is critical in qualifying you for a mortgage. A high debt-to-income ratio is a common reason for many mortgage loan applications being declined. DTI ratio limits vary from one firm to the other, hence it is advisable to seek a firm that offers a more flexible rate when applying for a mortgage fund.
The third factor to consider is your credit score. This is a three-digit number between 300-850 that scores your borrowing history. It is calculated independently by credit bureaus using your payment history and credit limit usage amongst other factors. Upon applying for a mortgage fund, the lending firm usually contacts the credit bureaus to provide them with your credit score ratings. This history provides the funding institution with clarity of the likelihood of you repaying the loan. Various firms have minimum credit score ratings. However, government loans usually have the lowest rating requirement. Credit score ratings affect the interest rates given to a borrower. The higher the credit score ratings, the better the interest rates given to a client.
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