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Just having a large amount of income or anexceptionally high credit score is NOT ENOUGHto get you approved for a loan.

The key is UNDERSTANDING the role ofeach factor so that you can optimize yourmortgage application and ensure that youget the loan you want for your homepurchase.

The largest role your income plays in the mortgageapplication is how much money is left after your monthlydebts are paid.

When you apply for a mortgage this means all debts including:

income vs. debts

Credit cards

Installment loans

Student loans

Mortgage payment including principal, interest, taxes,and insurance

DEBT RATIOis the percentage of 

total debt to total assets

Lenders want a particularpercentage of your income to gotowards your monthly debts,leaving the remaining percentageup to your discretion.

% of your monthly income goestowards your housing costs

% towards the total monthly debtsincluding housing and all otherdebts.

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DEBT RATIOEXPLAINED

S S T O C K T O NC A F E

T H E

W H A T Y O U R I N C O M ED E T E R M I N E S

The amount of money thebank can safely lend you

What you can afford

It is not the only determining factorregarding the type of loan, interest rate, oreven loan approval

S S T O C K T O NC A F E

T H E

W H A T T O P A Y O F F T OI N C R E A S E Y O U RB O R R O W I N G P O W E R

The debt with the highest minimumpayment

WHY?They will directly impact your debt ratio the

most, giving you more borrowing power

CREDIT SCOREAND INTEREST RATES

Generally, the higher your credit score, the

lower the risk you pose to the bank so the

lower your interest rate becomes.

BASIC GUIDELINESFOR MOST LOANSCONVENTIONAL LOANS – The minimums can vary, but the general

consensus is 680, which some lenders allowing scores slightly lower

FHA – The minimum credit score to put down the low 3.5 percent

down payment is 580, but a score of 500 or higher can still get

approved with a 10 percent down payment

VA – The general minimum is 620, although the VA is less focused on

credit score and more on credit history

CLICK HERETO LEARN MORE

INFORMATION ORIGINALLY PUBLISHED APR/9/2016

Justin McHood is Americas Mortgage Commentatorand has been providing Mortgage commentary forover 10 years.

INFORMATION PROVIDED BY:Justin McHood

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