Preplanning can help you get just the right mortgage loan for the right property. Taking out a mortgage loan is about the biggest investment you’ll ever make, yet many people go into the application process with no more thought than if they were buying a new lamp.
The first thing that you need to do is determine what kind of loan you might prequalify for. Start with the loan-to-value ratio. The LTV ratio divides the loan amount over the appraised value of the property. Look at your LTV ratio: if it’s higher than 80%, you might still get the loan—but you’ll pay more every month and you’ll have to carry private mortgage insurance.
How do you know how much you can afford? Believe it or not, there’s a simple formula for that, too. This time you’re using the debt-to-income ratio. List all your monthly expenses (current mortgage or rent, student loans, vehicle loans, insurance, utilities, credit cards, taxes). Now take your monthly gross income (i.e., your yearly salary divided by 12). The DTI ratio is the first figure over the second. If it comes out to 43% or above, there could be a problem. It’s not an insurmountable problem, but you need to be aware of anything that could affect your home purchase.
If you plan ahead you’ll have a better sense of what obstacles may be in your way when you apply for a mortgage loan in 2017. At Avrus Financial and Mortgage, we help first-time homebuyers prequalify and get preapproved for a mortgage in Florida, Georgia, and California, and we can help you, too.
Why not ask us how… today?