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Consumers interested in purchasing or refinancing a home will pay an interest rate based on current market conditions and their ability to pay back the loan. The borrower’s income and debt ratios are taken into consideration by the lender, as well as the predictability factor provided by credit scoring. It’s important to have a mortgage professional in your corner that has a keen eye for solutions to improving credit scores in an effort to get the best interest rate possible.

Interest rates associated with various loan programs are broken down into schedules based on credit score ratings. While each lender has its own guidelines, it’s safe to assume that as the consumer’s credit score goes down, interest rates will go up.

A borrower with an outstanding credit rating will get what is called an A-paper loan. This type of borrower is rewarded with a lower interest rate because they have a proven track record of using credit sensibly and paying their bills on time.

Loans designed for consumers with less-than-perfect credit – sometimes referred to as “sub-prime” – can range anywhere from A-minus, B-paper, C-paper or D-paper loans.

If you have already taken out a mortgage loan with a higher interest rate because your credit score was a little under par, you will really appreciate the value in doing a little work to improve your credit score. Refinancing from a D-paper loan to a B-paper classification can save literally thousands of dollars in financing fees over time, even though the B-paper loan is still considered sub-prime.

A qualified mortgage consultant will guide you through the nuances of the process of improving your credit score to refinance and save money. First and foremost, he or she will want to review the terms of the existing mortgage loan to determine if you have a pre-payment penalty clause written into your contract. In general terms, that means that if you sell the home or try to refinance before the pre-payment penalty expires and you have not already paid off 20 percent of the original loan amount, you will most likely have to pay a 3 percent fee back to the lender to compensate for the high risk and high costs incurred to provide that financing.

Next, you should obtain free copies of your credit reports from www.annualcreditreport.com and start working on improving the credit score six months prior to the expiration date on your existing pre-payment penalty.

There are five factors that make up the credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards unless you will benefit from such action. You will want to verify that negative items you have paid off are being removed from your credit report, and that good credit history is being reported to all three bureaus. You’ll also want to dispute any errors that appear on your credit reports and seek to have those removed entirely.

Once your credit score improves, it’s time to refinance at a better interest rate. Your mortgage professional should look for a program that carries no more than a two-year prepayment penalty so you can continue to refinance as your credit score increases. You can repeat this process until you reach A-paper status and secure the best interest rate available.

This is a strategy that also works well for first time home buyers who do not have enough credit history under their belt to get an A-paper loan at the time of purchase. The important thing is to work with a mortgage consultant who can give you a road map to follow and a strategy for success in building personal wealth.

While many borrowers are concerned with what they need to do in order to qualify for a mortgage, there are also a number of things that borrowers should not do once approved for a loan.

In addition it’s a good idea to give yourself a couple of extra days if possible to schedule movers, landscaping companies or and other repairs for the new house. This will give you extra time to get the closing completed and the transaction funded. If you schedule movers or other companies the same day as closing or even the day after you might be in for a stressful situation if for any reason the closing is delayed.

Always consult with your mortgage professional when there is a question regarding any of this because it can cost you your home loan.

After applying for a mortgage do not let anyone pull your credit or apply for any new credit at all. Try to keep everything the same as far as credit goes as when you where initially pre-approved unless told different by your loan officer.

Do not ignore to tell your mortgage broker about any material changes in the purchase agreement you and the seller come to agree upon after the mortgage process has begun. A slightly lower sale price can alter the loan-to-value ratio and requires re-submission of loan documents. Your mortgage broker and lender have to be made aware if any addendum is later attached to the purchase contract.

After applying for a mortgage be sure to advise your loan officer to any changes in your marital status or name changes. This will help you avoid problems with the final closing documents and/or title problems.

Be certain not to lease a car or allow a car dealer to “pre-qualify” you for a car lease or loan. It doesn’t matter whether or not the car is new or used, because either way this would fall under the category of taking on new debt, and is a very common reason for individuals, particularly those making purchases for the first time, run into complications with their mortgage application process after the fact. If you have any need to make any further applications for substantial credit, please give us a call.

Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money down—well, why not just do it? Answer: because you will change what the mortgage industry calls your “debt-to-income ratios” (the relationship of your income to your debt).

Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, “What if it’s a BETTER job, for MORE money, in a DIFFERENT field?” Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.

Do not pack too soon. Well, go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other important paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van.

Do not lease a new car. This should go under the general heading of “no new debt.” It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your “debt-to-income ratios” and may cause you not to qualify for your mortgage.

Do not stop making your regular monthly payments after applying for a mortgage. Borrowers refinancing their home to payoff other debts sometimes stop making their regular monthly payments because they are going to payoff the debt. This can cause problems during the loan process because not making payments on time may hurt your credit rating. Lower credit scores may cause your interest rate to go up or result in you being denied credit.

Once you apply for a mortgage to refinance or for a home purchase your job is not done. Be involved, don’t just wait for the call to schedule the closing. Check with your mortgage broker, find out what is going on with your loan, talk to your realtor make sure everything you want done is getting done. Be proactive not reactive, don’t wait for a problem then rush to solve it, work to prevent any issues form happening in the first place.

Do not pay off any old collection accounts on your credit report unless you were specifically told to do so by your mortgage professional. Paying off old collection debt will often signal to the credit reporting agencies that there is new activity on an negative entry and actually lower your credit score.

Before lenders lend money, they need to be assured that the funds will be repaid. In other words, is the prospective borrower creditworthy? To find out, they ask for various types of information.

Sub-prime lenders understand you may have come upon some hard times in the past and will look at your more recent credit history.

Lenders look at the risk that you will default on the loan, based on several factors. Those include credit score, history of paying your mortgage or rent on time, debt-to-income ratio, occupancy type (primary residence, second home or investment property), property type (single-family, 2-unit, condo), percentage of the property’s value you want to borrow (60%, 70% 80% 100%), and work history, among others.

Lenders will look at an applicants past credit history, income and the value of collateral being used to secure the mortgage. The lenders will compare this information to their guidelines to determine if the applicant is a good credit risk.

With regards to repayment capability, most banks prefer that a borrower has total debt obligations of less than 45% of gross income. Total debt include any monthly obligations the borrower has, including the proposed mortgage payment, property tax, homeowner insurance, automobile financing, credit card installments, alimony, etc. Utility and food costs are not considered debts and are not included in the Debt-to-Income ratio. Some non-prime mortgage lenders allow a Debt-to-Income ratio of up to 55%.

Lenders will look for job stability, credit worthiness, disposable income, liquid assets, debt to income ratios and loan to value ratios among many other things. Sometimes a borrower can be deficient or weak in one of the above mentioned areas but make up for it in others to still be considered for the financing desired. Lenders don’t typically want to see a lot of job changing or career changing happening. Also, obviously the better the credit the better the chance the lender will be repaid on the debt. Disposable income is how much income is left over after you have paid all of your monthly obligations. Debt to income is a ratio that is calculated based off of how much you make divided by how much your obligations are and LTV (loan to value is simply how much of a mortgage you are borrowing compared to how much your home is valued at. These are all very important items that a lender looks at as a part of your whole package.

Reserves is another factor that lenders want to see. Reserves are simply how much liquid cash you have in the bank to make payments with. If you are a first time home buyer the reserves can be anywhere from 2 -6 months worth of PITI (Principle, Interest, Taxes and Insurance). Various lenders will have different guidelines so be sure to ask your Mortgage Professional how much cash you will need to have in reserves.

Your credit worthiness will affect the interest rate and the number of programs that are available to you.

Not realizing you are self-employed. First-time buyers who are self-employed (which can include working at home, being paid by commission only, or owning 25 percent or more of a business) often need to show tax returns as a proof of income. Communicate your employment status before the loan hits the underwriting process and avoid snags later.

Failure to accurately provide employment and mortgage history will often result in a rejection of your loan application.

Judgments and liens are often causes of loan rejection.

Debt to Income Ratios exceeds the lenders guidelines.

Large purchases such as automobiles made after loan application.

In most cases you are required to maintain your current credit status. In the event that your credit scores drop, which can happen from taking on additional debts, your loan may be rejected at the last minute. It is common for lenders to re-check credit the week of closing.

Untimely responses by the borrower. Loan approvals are subject to additional conditions. These conditions often require that the broker contact the borrower to obtain additional information and documentation. If you do not provide this information in a timely manner it may result in your approval being rejected.

Be sure to maintain your current job status while applying for a loan. A raise or promotion at your current job will not hurt you, but being fired or quitting definitely will. Many times the lender will do a verbal verification of employment the day of, or day before, your anticipated closing.

If you are a 1099 employee you are considered self employed. If you do not have a 2 year history the lender may turn you down for your loan because of this.

Keep from moving funds around in your bank accounts or loaning large sums of money to a family member just before closing. Many lenders require proof the funds for closing are coming from your bank account.

Ratios used to determine whether a borrower can qualify for a mortgage. They are based on a borrowers housing expense as a percentage of income and his total debt as a percentage of income.

Debt to Income Ratio or DTI can be improved by paying down liabilities with high monthly payments compared to the balance on the account. In some cases some of your debts can be excluded from the calculation of your DTI. For example if you have an auto loan and you have less than 10 payments left you can exclude this monthly payment from the calculation thus reducing your DTI.

There are several loan types that can help you if you have a high debt ratio with good credit. One is called a No Ratio loan: The Borrower’s source of income is verified, but the income amount is neither disclosed nor verified. The second type of loan is called No Income No Asset: The Borrower’s employment, income, or assets are not disclosed or verified. A third type of loan usually associated with FHA is the Streamline loan: No income documentation or disclosure is required.

When evaluating your Debt-to-Income ratio, the Back DTI plays a more important role than the Front DTI. The Front DTI is calculated by dividing the proposed housing expenses, also referred to as PITI, by the borrowers’ total gross income. Housing expenses or PITI is defined as the inevitable expenses incurred as a direct result of owning the subject property, such as mortgage payment, property tax, hazard insurance, (hence the acronym for Principal, Interest, Taxes, and Insurance), homeowner association dues, private mortgage insurance, etc. The Back DTI is calculated by dividing the borrowers’ total monthly obligations by the total gross monthly income. Total monthly obligations includes not only the housing expenses, but also all installment debt payments such as leased/financed vehicle and credit card payments. Most lender banks would allow a borrower’s Front DTI ratio to go above 45% if the borrower has no other obligations.

Qualifying ratios also called your debit to income ratios or debt load consist of your total verifiable gross monthly income divided by your new proposed payment, all your other monthly debits such as minimum payments on charge cards, auto loan or lease payments, student loans, consumer loans, child support and alimony.

A debt to income ratio is simply a way of determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met. Qualifying ratios are guidelines, an excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit. Typically conventional loans have a qualifying ratio of 28/36. Usually an FHA loan will allow for a higher debt load, reflected in a higher (29/41) qualifying ratio. The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner’s association dues). The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Not all monthly debts/liabilities have to be taken into consideration when determining the amount of a borrower’s recurring monthly debt obligations. Such liabilities are known as contingent liabilities. Some of the most common that may be exempt under certain circumstances are co-signed loans, court-ordered assignment of debt, and loans secured by financial assets

Many mortgage lenders have thrown those old ratios out the window, approving household debt ratios in excess of 50% of income. If over 50% of your income is going to debt service you will be forced to either live a very shallow life with little or no funds for saving, investment or enjoyment, or, worse, are headed for a financial disaster.

Qualifying ratios are only a rough guidelines and underwriters consider many variables in their analysis. Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, a substantial down payment or excellent credit history will influence the decision to approve or deny a particular loan.

There are loan programs such as No Ratio and No Doc, that will basically avoid the debt ratio calculation for you. The only one that can make this decision, is the borrower. They are the person that will have to make the payments, with or without the calculation.

Automated underwriting can also bypass the typical qualifying ratios. Automated underwriting takes into consideration credit and assets and can give approvals for debt ratios or 50,60,or 70% or more.

The front-end ratio, or front ratio, compares your monthly pre-tax income with your house payment. The other ratio that lenders look at is the back-end ratio, or back ratio. This calculates how much of your pre-tax income will payments— such as auto loans, credit cards, go toward your house payment, plus all of your other monthly debt etc. It can be useful to figure out these numbers yourself and see if the house payment you have in mind may actually cause you undue financial risk.

Many times on a refinance loan the way to lower your ratios is to pay off debt at the time of the refinance, this reduces your monthly payments and in turn, your ratios.

Some lenders are stricter about qualifying ratios than others. Just being within the lender’s debt to income ratio limits is only one aspect of qualifying for a home loan. Most lenders will consider the overall financial picture. If everything looks good, a lender may allow you to carry more debt. When shopping for a new home, it is always wise to be pre-approved, so that you’ll know specifically what price range and loan payment fits your budget. Remember to be Pre-Approved, Pre-Qualified is just not enough.

How much house can you afford? That’s what lenders want to know when making their decisions about your mortgage. If you are having trouble qualifying for a loan program because of your ratios, contact us and ask about extending the term or discussing a temporary buy down to help you qualify.

Qualifying ratios can prevent purchasers from obtaining a home however there is an opportunity to use a 40 year mortgage to reduce the payment by extending the term and therefore create a more favorable qualifying ratio calculation.

Many lenders allow debt to income ratios to go as high as 55%. Meaning the new mortgage payments plus all existing monthly liabilities can be as high as 55% of the borrowers total gross income.

On conforming loans, you can still usually get an approval even if your debt ratios are higher than the set standards. Low loan to value ratios and lots of reserves can offset higher debt to income ratios.

Although your ratios may be high you can still qualify for alternative programs with higher ratios. For the most part a lender will look at what’s reported on your credit report to determine your ratios. The best thing for you to do is consult a Professional Mortgage Broker and have them look at your credit to see where your ratios are and what you qualify for. And remember that safe secure online forms from a Mortgage Website is the fastest way to achieve this.

Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.

Lenders qualify a borrowers Debt To Income ratio (DTI) using Principal Interest Taxes and Insurance (PITI) combined even though some borrowers only want to pay the principal and interest to the lender and pay the taxes directly to their local government and insurance directly to their insurance provider.

Principal is the amount of money you borrowed from the lender. Interest is a fee you pay back to the lending institution for borrowing the money. Taxes indicate your property taxes, these include items like your city tax, county tax and school education tax. Insurance is the coverage you have on you house to protect you from loses.

PITI is typically quoted on a monthly basis and compared to a borrower’s monthly gross income by means of computing the individual’s front-end and back-end ratios, which are used to approve mortgage loans.

Other monthly payments that are included in the PITI include Mortgage Insurance and Home Owners Association (HOA) dues.

Although lenders require reserves of PITI even when refinancing, many lenders will allow the cash out amount from the refinance, to cover the PITI reserves.

Another factor that some people over look which is not a part of your PITI is your maintenance on your home. You will need to make sure you can afford things like yard work and simple repairs when taking out a loan on a property.

Lenders often require cash reserves equal to several months PITI, in order to qualify a borrower.

Investment properties often require a minimum of 6 months PITI reserves for a mortgage, primary properties may not require any reserves depending upon credit, and many subprime lenders do not require any reserves.

The total PITI payment is used to calculate qualifying factors such as your debt ratio and the amount of cash reserves that may be required on a loan. Even if a borrower chooses to waive an escrow account and pay the taxes and insurance themselves.

PITI is the total monthly payment that must be made for that mortgage loan. Many times taxes and insurance are only estimated by the mortgage broker giving a quote which is why different good faith estimates vary so much from broker to broker. Always ask for the PI payment to compare loan programs as well as the APR which includes the real total cost of the loan.

Lenders use the proposed PITI together with the borrower’s income to evaluate the borrower’s capability to repay the loan.

Editors Note: Due to the mortgage and credit crunch, many mortgage loan programs are no longer be available. If you’re in need of a mortgage loan in Denver contact us to discuss your mortgage options.

A loan program is just a way of saying what type of loan you are applying for. There are loan programs to suit just about every kind of borrower. There are programs for poor credit, no credit, great credit, no way to prove income, high debt ratios, pecan experienced loan officer will know all of these programs so that they can help get almost any borrower a loan. Not everyone will qualify for a mortgage, and there is no way around that. However, with the wide array of loan programs available, there is a good chance that YOU can get a loan TODAY.

One example of a loan program that has become popular recently is the pay option ARM. Basically, it gives you the option of making four different payments each month:-Minimum payment (you actually pay less than the interest due for the month, and the difference is added to your loan amount)-Interest only payment (you only pay the amount of interest that is due for the month)-30 year amortization (pay the amount that it would take to pay off the loan in 30 years)-15 year amortization (pay the amount that it would take to pay off the loan in 15 years)As you can see, this loan program offers a lot of flexibility. However, it is based on an ARM, so the interest rate is always changing. Also, it can be tempting to make the minimum payment every month, but if you do, you’ll find yourself owing more on your home then when you started. Many innocent homeowners have been lured into this loan with promises of low rates or payments, only to find that things weren’t as they appeared.

There are literally thousands of different mortgage loan programs available out there. To name a few: 3/1 ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM, Pay Option ARM, 30/15 Balloon Mortgage, 30/7 balloon, 30 year fixed rate, 20 year fixed rate, 15 year fixed rate, 3/1 interest only ARM, 5/1 interest only ARM, etc…. There are also different income verification programs available, such as: stated income stated asset, stated income verified asset, no income no asset, no ratio, no doc., 12 months bank statements, 24 months bank statements, and many more. This is just a very short list of some of the thousands of mortgage loan programs available. Many times different loan programs are combined also such as: an 80/10 (1st and 2nd mortgage), cash-out, interest only loan with no income documentation. While all this can sometimes be very confusing to a homeowner, a good mortgage broker can find the “right” program that best suits each unique situation of each borrower.

One very important thing to keep in mind about mortgage loan programs is that they are never carved in stone. Changes in market conditions and investment climates cause lenders to have to make changes to their programs and guidelines. Don’t make the mistake of thinking that just because a program that you qualify for exists today that it will always be there.

Nearly 80 % of all mortgages today are being negotiated by Mortgage brokers. This is because today there are so many different programs to choose from - the process can indeed become daunting. Let a mortgage professional guide you thru the myriad of choices to find the program that suits your needs.

Mortgage brokers are a good source for unique loan programs. Local and commercial banks usually grant loans only to those who have perfect credit history, sufficient income and with strong assets. In addition to these type of loan programs, most mortgage brokers also have access to niche loan products for home buyers in less than perfect financial situations, such as high debt-to-income ratio, high loan-to-house value ratio, no-income-verification, bad credit, history of bankruptcy and foreclosure, etc. Some brokers also have loan programs for unique homes, such as multi-million dollar home, condominium and cooperative units that do not qualify Fannie Mae guidelines, etc.

Other sites: Mortgage Broker | 1003 The Loan Application | MIP | Delinquency | Fixed-rate mortgage| Pay Option Arm Calculator

There are several advantages to choosing a Mortgage Broker for your real estate financing needs rather than a local bank. One advantage is expertise. If you needed brain surgery, would go to a general surgeon or an expert who specializes in brain surgery? Mortgage brokers are professionals who specialize in one area of the banking / lending industry, real estate financing. We have access to more lenders, more loan programs, different types of loans, and specialty “niche” products than a local bank. In most cases your local bank is probably a large regional or national bank with many branches and services available. You may get passed along to another department, or get lost in a phone system before you ever talk to a loan officer. While to your mortgage broker you are more than just a number, customer service is important to any mortgage broker. You generally only deal with one person who will help you through the process. Maybe the biggest advantage and least recognized by consumers is that mortgage brokers deal in wholesale rates, while your bank deals in retail rates. Not only can mortgage brokers “shop” your scenario around for you but they are doing it in wholesale side of the industry.

If you are undecided between a local bank and a mortgage broker, ask yourself if you are the type that dislike comparative shopping, or a procrastinator, or in a unique financial situation that is not apprehensible to most banks, a knowledgeable and competent broker may be a of great service. Even if you intend to shop for a mortgage on your own, you should always compare what mortgage brokers can offer.

Wholesale rate is the rate banks offer through mortgage brokers. The interest rate and points obtained through the use of a broker may be lower than one would get by going to a bank directly. Since brokers do most of the loan processing and pick up all the marketing costs, banks reason that they can afford to offer a lower rate as a way of passing to brokers what they save on overhead costs and advertisement expenses.

The uniqueness of loan programs available to Mortgage Brokers can save you thousands of dollars over a bank. Some of these programs would be for situations like low FICO scores, high DTI (debt to income ratios) and other detrimental factors affecting your credit and throwing you into a non-conforming loan scenario.

Your local bank is not as likely to take compensating factors into consideration, when approving you for a loan. The Mortgage Broker, has several lenders that are willing to consider a loan applicant, even if they do have low FICO scores, or a high debt to income ratio. Some compensating factors that your mortgage broker may use to qualify you for a loan include: length of time at current residence (without having late payments), liquid assets, low LTV (Loan-to-Value), length at current job, and low payment shock (mortgage payment not increasing drastically over your current rent payment). The mortgage broker can also use a good letter of explanation (LOX) to help an underwriter overlook any negative factors with your loan scenario. This combined with the mortgage broker having more programs available to them, could make the difference of being in your dream home, or not!

A mortgage broker often has a larger network of mortgage lenders so they can often find you the best deal. The more product knowledge you have when shopping for a mortgage, the more power you have to get the best deal.

It is important to understand the difference between mortgage lenders and mortgage brokers. As a rule, mortgage brokers don’t make a decision whether to extend you a loan, and they don’t actually make the loan. They work as intermediaries between borrowers and lending sources. However this fact does not mean that you are paying a higher rate. Since mortgage brokers obtain their funds from a variety of sources, they can even save you money by shopping your loan.

The relationship between the amount of a mortgage and the total value of the property.

Sometimes you may get a better rate on your 1st mortgage when your first mortgage has a LTV of 70% or 75%.

Also the lower the loan to value the documentation requirement maybe reduced. Is some cases of 65% or less no documentation is required with no increase in interest rate.

Still don’t understand what an LTV is? I can understand it could be confusing but I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.

Besides credit history, income, and assets, Loan-to-Value Ratio is an important aspect mortgage banks look at. It shows the lenders how much stakes the homeowner has put into the property. The lower the LTV ratio, the higher the stake the homeowner has in the home and less likely to default on the loan, which means less risk for the bank in granting the loan.

The lower your LTV, the lower your interest rate choices when refinancing.

In a purchase transaction, the more money you put as a down payment, the lower your LTV will be. A lower LTV will qualify you for a lower interest rate than a higher LTV.

Many times your fico score if too low, will limit you to a maximum LTV available during the qualification process.

Interest paid on any part of a mortgage exceeding the home’s value cannot be deducted in most cases on your tax returns

There are now programs that will give a homeowner 103% - 107% LTV, allowing the loan to pay for the closing costs of the real estate transaction. These types of loans do have higher interest rates. The higher rates are worth paying in some cases rather than throwing your money away on rent each and every month.

Loan-to-value ratio is derived from dividing the loan amount by the property value. Property value is determined by the purchase price or the appraisal value of the property, whichever is less. Many lenders offer loan programs of up to 100% LTV to borrowers with positive compensating factors such as good credit history and low Debt-to-Income Ratios. In addition, a knowledgeable loan officer can often structure loans to accomplish 100% LTV or even 103% LTV mortgages for qualifying homebuyers.

You can even get loans for as much as 125% LTV.

How much house can I afford is a very popular question among homebuyers. The main factor to determine this is your debt to income ratio, or DTI. Different lenders have different requirements and guidelines for what the maximum debt ratio they will allow. Most non-conforming, or subprime, lenders have maximum debt to income ratio limits around 50-55%. Some lenders have lower limits and some lenders have higher limits and through the use of some automated underwriting engines you may even be able to get approved with a DTI of 65%. How high your LTV is, the amount of money your borrowing compared to the purchase price or value of the home, can also affect DTI guidelines. The less money you put down usually the lower DTI that is allowed.

Getting approved beforehand is of the utmost importance so that you can find out how much home you can afford. There are many different variables that will affect how much home you can afford such as how much the property taxes are of the property that you find, whether the house you purchase has an association with and association fee, and how much you end up needing to pay for homeowners insurance. All of these charges will affect your debt to income ratios.

Depending on which loan program you choose will change the amount you will be approved for. Loans that have interest only periods will reduce your monthly payment, therefore allowing you the option of purchasing a more expensive home.

There are other loan programs that do not calculate ratios, called “no ratio” loans. These are very popular for those that may not be able to document all their income. Stated and no ratio loans are very popular programs. Some people although on paper can’t afford x amount, in reality they can truly afford it.

Other sites: Loan Officer | MIP | Investor Loans | Stated Income Loan| Pay Option Arm Calculator

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