Qualifying for Your Mortgage

This section gives you some basic guidance about getting qualified for your home loan. One of the biggest mistakes that prospective home buyers make is not obtaining full preapproval before they begin looking for a new home.

Look through the articles in this section, but apply soon if you are considering a home purchase or a home refinance.

The basic guidelines for qualifying to purchase or refinance your home are based on an analysis of your Credit character, your Capacity, and your Collateral. This is generally know as the 3 C's of underwriting.

Credit character is much more that your credit score. In fact credit character, as well as the others of the 3C's, predate computerized credit scoring by decades. Most recently though credit scoring models have  become increasingly the key tool to evaluate credit character. The goal of evaluating credit character is to determine objectively your willingness to pay.

Other considerations include the number of your accounts, the age of your accounts, the types of your accounts. These factors combined are called your trade depth.

Your credit character is evaluated for your housing history, your consumer debt (installment and revolving), collections, and public records such as bankruptcy, liens, etc.

There is a separate section in this site on Credit Information . If you will need assistance to restore or rebuild your credit, start the application process  immediately. At American Acceptance Mortgage, we are experts at credit restoration. there are many firms charging fees, some very expensive, to do what you can do yourself - if you only had some guidance. My track record at credit restoration is proven. Call or email me.

Capacity is the evaluation of your ability to pay. The basic measurement is called debt ratio or debt to income ratio (DTI). A separate calculation is made for your new house payment and then for your new total debts, including your new house payment.

The basic DTI ratios for conventional loans are 28% housing and 36% total. Many borrowers though can qualify for higher debt ratios, if other qualifying considerations are strong.

The basic DTI ratios for FHA loans are 31% and 43%. VA loans have a single ratio of 41%, but also measure the residual income.  This is the money remaining each month after all bills, income taxes, and an allowance for home maintenance is deducted.

These ratios are only a guide. To determine what payments you can be approved for, it is necessary for you to make full application and to provide the required documentation.

Another measurement of your capacity is your reserves. This is the total liquid assets remaining after your loan is closed. Reserves are measured by the number of house payments the total assets equals. If you have $2000 remaining after closing, and your house payment (PITI) is $1000, then you have 2 months reserves.

Collateral is the final qualifying category that we are discussing here. Considerations include the property type (frame, modular, manufactured, etc.),  the property use (owner occupied or investment), number of units (single, duplex, etc),  the amount of equity (LTV), and the property condition and value.

Take time to look over the articles in this section:Your Down Payment, Gifts as Downpayment, Documenting Assets, 401k for Downpayment, Getting an Appraisal, but realize the importance of moving quickly to finanize you home loan approval. Please visit the site often, more content in this area is coming.

 If you have other questions please complete the Mortgage Question form below. You can give a secure online application by clicking here. Or you can call, email, or open a chat.