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U N D E R S T A N D T H E R O L EI N C O M E A N D C R E D I T S C O R EH A V E O N Y O U R M O R T G A G E
MORTGAGE.INFO
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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.
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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
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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.
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% of your monthly income goestowards your housing costs
% towards the total monthly debtsincluding housing and all otherdebts.
28
36
DEBT RATIOEXPLAINED
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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
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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
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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.
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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
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CLICK HERETO LEARN MORE
INFORMATION ORIGINALLY PUBLISHED APR/9/2016
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Justin McHood is Americas Mortgage Commentatorand has been providing Mortgage commentary forover 10 years.
INFORMATION PROVIDED BY:Justin McHood
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