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Lenders
generally
base
mortgage
decisions on
five factors
- income
stability,
debt-to-income
ratio,
loan-to-value
(LTV),
property
appraisal,
and credit
history.
Knowing what
to expect
and
anticipating
potential
obstacles
before you
apply can
help you can
boost your
borrowing
power. But
if your
individual
situation is
different
from the
standard
ratios
outlined
below, don't
despair!
Wells Fargo
Home
Mortgage has
programs
that
accommodate
many
financial
situations.
Please
contact us
today for a
personalized
assessment
of your
needs.
Income
stability
Any income
that can be
verified and
has a 2-year
history such
as
investment
interest,
commissions,
royalties,
social
security,
disability
and alimony
payments, in
addition to
your salary,
counts to
your
advantage.
If your
credit and
assets are a
little
shaky, a
lender may
be more
accommodating
if someone
with an
established
credit
history
co-signs
your loan.
Debt-to-income
ratio
Lenders
prefer that
the
proportion
of your
combined
debt and
housing
expense be
no more than
36%
(28% for
housing and
8% for debt)
of your
monthly
pre-tax
income.
Do an
inventory of
your current
debts. It's
a good idea
to reduce
your debt
before
applying.
Being
overextended
may work
against you.
Make do with
your car a
few more
years.
Consolidate
outstanding
balances at
a lower
interest
rate. Take
the time you
need now to
pay down
your debt.
Loan-to-value
Loan-to-value
(LTV) is the
ratio of
your loan
amount to
the value of
your
property.
This ratio
tells a
lender how
much equity
you will
have in your
home. The
higher your
equity and
the lower
your LTV,
the larger
your stake
in the
investment
and the less
risk there
is for the
lender. A
LTV of 80%,
for example,
means that
you are
putting 20%
down and
borrowing
80% of the
property's
value
Borrowers
with less
than 20%
equity are
generally
required to
buy private
mortgage
insurance (PMI),
which
protects the
lender in
case of a
loan
default.
Loan-to-value
guidelines
are
determined
by the
borrower's
circumstances
and the type
of loan.
Property
appraisal
This is a
professional
assessment
of your
property by
a licensed
appraiser to
make sure
that its
market value
is
sufficient
for the loan
amount. A
lender needs
to know that
the
borrower's
collateral
(property
and down
payment)
will cover
the loan
amount in
case of
default.
An appraisal
helps you to
understand
the value of
your
investment.
In addition
to a
property
appraisal,
often your
real estate
agent can
help provide
you with
comparable
sales in the
neighborhood.
Consider
foreclosed
properties.
You'll have
to put in a
lot of extra
fix-it work,
but you
could get a
good deal.
Even better,
lenders and
government
agencies are
often
willing to
help ease
the
financing.
To search
for
foreclosed
properties,
go to
pasreo.com.
Credit
history
Naturally a
lender wants
to know your
payment
habits
before
giving you a
large sum of
money. It's
a good idea
to
check your
credit
report
before you
begin the
process in
order to
correct any
errors.
Be
informed
The more you
know about
home
financing,
the better
prepared
you'll be
for the
homebuying
process.
Sign up for
our free
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