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How much do I qualify for mortgage?
07/09/09
Qualify Mortgage
One of the most critical elements of human existence is reliable shelter. Housing is an integral part of development and is a necessary requirement for a functional economy. The demand for housing is so high that it has pushed the cost of owning a house well beyond the reach of many. For this reason, millions of people are living in informal settlements, especially in developing countries. The situation is however no different even in developed countries. This is why the provision of basic shelter was ear marked as one of the millennium development goals.
The crashing of the world markets due to the global credit crunch has not made things any easier. Real estate is touted as one of the root causes for the entire crisis, based on the over pricing in some of these countries to cash in on the demand and easy credit. Some of the people that took mortgages have been thrown out of their homes for failing to pay the monthly premiums. This has caused many eligible mortgage takers to sit back and re-examine their situation to make sure they don’t fall into the same trap. To understand the mortgaging process, it is important to understand what the requirements of the industry are.
For you to qualify for a mortgage, one of the things that must be easily done is the estimation of your income. Mortgages are generally based on a predictable revenue stream. They will examine your stated income and all its sources. Some of the sources could include salary from employment, annual bonuses, commissions and many more. Sources such as bonuses and commissions carry little weight since they can fluctuate from year to year. However, if you are able to substantiate sustained income from bonuses and commissions over a reasonable length of time, it might work well for you. Overall, nothing trounces a weight of the salary since it is almost always guaranteed at the end of the month.
In line with you salary, the mortgaging company may also want to know more about your employment history. If you have shown that you cannot hold a job for more than 6months, then the level of risk in lending to you is too high. Remember that lending is based on the ability of the lender to predict your income stream. Having a checkered employment history is an issue that may play to your disadvantage. Having a great employment record i.e. working in an organization for a decent number of years before moving to the next, will greatly increase you chances of getting that mortgage.
They will also look at your personal assets. This means anything of financial value that you own. The purpose of this is to ensure that they can attach these properties to act as collateral for the mortgage or can be auctioned in the event that you default on paying your monthly premiums. They also want to see if you are a man/woman of means. The more financially valuable properties you have, the better the chances of securing that mortgage.
Mortgages, just like any other kind of lending, are all about ascertaining risks and lending based on those risks. Income estimation, background information on employment history and assessment of personal assets are all steps taken to ensure that the risk in lending to you is minimized.
Down Payment Savings
Potential home buyers who can make a house payment with no difficulty sometimes can’t buy a house because they don’t have the funds required for a downpayment and closing costs. One solution to the problem–use a downpayment gift assistance program, sometimes called a downpayment grant program.
Waiting until you have a sizable down payment can save you thousands every year and provides a cushion a new homeowner might need.
“Some couples can afford the house when they’re both working, but if a kid comes along and one wants to stop working, then they have a problem,” says Michael Eisenberg, a CPA and personal financial specialist in West Los Angeles, Calif. Even in his area, where starter homes cost a lot more than $350,000, he recommends that young couples “sit back, stay renting and save your money for your down payment.” If your rent is reasonable and the housing market in your area has slowed, there’s even less reason to rush into buying.
“In the early years, you aren’t building any equity with the mortgage payment,” Eisenberg says. “If the market changes or your personal circumstances change and you’re forced to sell, you could lose money” if you made little or no down payment. The equity in your home can also give you an extra source of cash in an emergency.
Sellers are not allowed to give home buyers downpayment funds. That’s where gift assistance programs step in, providing a “work around” of those laws. 20% is required to avoid paying monthly PMI (monthly mortgage insurance) but I have recently obtained financing for my clients on conventional loans with as little as 5% down. It really depends on your credit score. If your FICO score is less that 700 you can expect to be required to put down 20%. How much do I need for down payment for a conventional mortgage loan. Your insight into what would be the best way to proceed would be much appreciated. A little advice would go a long way right now. I am very grateful for your help.
Downpayment gift or grant assistance programs help home buyers close on a home by providing funds for downpayment and closing costs. Find out how they work and how you can take advantage of a gift assistance program.