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Have you ever asked….

• What criteria does a lender use to qualify mortgage applicants
• How much income do I need to buy a house
• What’s the maximum mortgage amount I could be approved for
• What should I focus on to improve mortgage qualification
• What is the best mortgage rate I can get 
• What will my mortgage payments be?

Let’s answer each of these questions now…..

What criteria does a lender use for mortgage qualification ?

• Risk: Lenders look at how each of your revenue and debt details affect each other in order to evaluate your capacity ability to handle a mortgage.
• Income/Debt: Your income level is important, but lenders look at debt vs income together to assess if you make all your debt payments.
• Net Worth: Do you have savings? A car? Other semi-liquid properties/assets? Do you have the financial means to fix a major unexpected repair? A lender needs to know that you can take care of your property.
• Debt-to-income Ratio (DTI): This is a critical ratio that a lender will calculate to assess your financial ability to handle a mortgage.
• Credit score: Your credit score summarizes your credit-worthiness. A high credit score will give you access to the lowest mortgage rates. Regardless of how much income you make, a low credit score will prohibit mortgage qualification.

How much income do I need to buy a house ?

• It’s not just your income level but rather your monthly debt payments vs your income. Lenders look at debt vs income together to assess if you can handle all your debt payments.
• Type of income: Full-time employment is different from contract work. Permanent salaries are different from self-employed income. All forms of income are evaluated by lenders, but your type of income will dictate what documentation is required.
• Employability: If you’ve only been at your current employer for less that 3 years you will need more documentation to show employability.
• Self-Employed income: This type of income is the most challenging for borrowers. Specific documentation is required to help a bank assess a) how accurate is the reported income b) can the borrower continue to generate this income.
• Self-Employed NET income: Entrepreneurs write use business expenses to lower offset revenue and taxes. Lenders will only consider your after-tax net income, not gross. So if you generated $200k a year, but wrote off 75% in expenses, the lender will only assess $50k of income.

What’s the maximum mortgage amount I could be approved for ?

• The debt-to-income ratio (DTI) is a critical ratio Lenders use to assess your ability to handle mortgage payments. The calculation divides all monthly debt payments by total monthly income. Scores above 44% are problematic as your debt payments represent a large portion of your income.
• The loan-to-value (LTV) is another important ratio. This metric looks at the value of the property versus the mortgage amount. A $1MM house with a mortgage of $800k = 80% LTV. The maximum LTV is 95% (requiring 5% down payment)
• Mortgage Insurance: Any mortgage that has an LTV higher than 80% will require mandatory mortgage insurance. This insurance premium is added to your mortgage payments.
  
• Jason Wodlinger Mortgages can estimate your maximum mortgage amount with just a few simple questions

Would you like to read more tips like….

• What is the best mortgage rate I can get
• What will your mortgage payments be?
• What’s the highest price I can afford to bid for a house?
• How much are real estate closing costs
• How a pre-approved helps in a bidding war?
• Can a first time home buyer actually be approved for a mortgage

What’s the highest price I can afford to bid for a house?

• Max vs budget: It’s important to distinguish between your maximum bid which you are comfortable with and your maximum financial limit. It’s always advisable to give yourself a buffer between comfortable and financially stretched
• Closing costs: Many home buyers forget about closing costs when buying a house. Be sure to budget for these expenses when you calculate your maximum price
• Conditions: It is ideal if you can make an offer with conditions such as financing and home inspection. But when bidding wars start conditions can weaken your offer. Having said that, if you make an unconditional offer, you are legally liable if you are not able to get financing.
• Hype: Objectivity is critical when house hunting. One can get caught up in the excitement of a bidding war only to discover that the purchase price is unrealistic. Also don’t forget that the lender will only loan the maximum amount regardless of how high bidding pushes up the final price

How much are real estate closing costs

• closing costs include services such as:
• home inspection, appraisal
• legal services
• title insurance, property insurance
• land transfer tax
• moving expenses
• and many more…….
• Costs: Generally speaking you should budget between 2 – 4% of the house value for closing costs
• Cash on hand: You will need to have cash on hand or available room on your credit card to pay for these costs. Some lenders will require that you have this cash in your bank account. Other lenders will allow a clost family member to “gift” you the money for closing costs

How a pre-approved helps in a bidding war?

• A pre-approval is a written commitment from the lender as to how much mortgage amount you’ve been approved for and what your interest rate and monthly payments will be.
• Bidding wars: A pre-approval confirms to the seller  that you are a serious buyer, proves you have the finances and are able to make a deposit immediately, confirms you can complete the closing process in a timely manner
• Process: Borrowers submit information related to income, debt, credit score to the lender. In some cases the lender will not require supporting documentation at this time. But they will once you find a house.
• Timing: Things can move quickly when a property hits the market. Arming yourself with a pre-approval enables you to move fast when you find something you want.

Can 1st time home buyers actually get approved for a mortgage

• Unbiased: Whether you are new to the housing market or a veteran, there is no negative bias towards either cohort. Lenders want to give everyone a mortgage.
• Coveted demographic: First-timers are highly valuable for lenders. They are usually from a younger generation which means the lender has many years to develop a lasting relaionship
• Grants / Incentives: Government incentives are plentiful targeting first-time buyers. Although you can find many programs online – talk to a mortgage agent to get the definitive list.
• Jason Wodlinger Mortgages can advise on all incentives and grants. We can walk you through the financing process from start to finish, ensure you are treated with respect and explain your financial situation to lenders in the best strongest light

JASON WODLINGER SERVICES
We explain…..

• everything about the mortgage qualification process
• the maximum mortgage amount you will qualify for
• how a lender would evaluate your situation
• the probability that you will qualify for a mortgage
• how to increase the probability that you will be approved for a mortgage
• what your mortgage interest rate will be
• what your total monthly mortgage payments will be
• explain the cost related to mortgage insurance for down-payments less than 80%
• the exact calculated result of your Debt-to-Income ratio

Let’s Connect
30 minute no obligation call

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