Step By Step Guide

Step by step guide continued...

How does a lender determine the mortgage amount you may receive?

When you first approach lenders about financing a mortgage for you, they will use two commonly accepted guidelines to help determine your ability to make mortgage payments. These guidelines are a starting point for evaluating your ability to make the payments on the proposed loan. So your lender will look closely at your individual financial situation to determine if more flexible guidelines are appropriate for you.

1. Your monthly housing costs (including mortgage payments, property taxes, homeowner and mortgage insurance, and home-owner’s fees) should total no more than 28 percent of your monthly gross (before taxes) income. In addition to your regular pay, your income can include funds you receive from overtime work, a part-time job or second job; retirement, VA, and Social Security benefits; disability; welfare and unemployment benefits; alimony; and child support.

2. Your monthly housing costs plus other long-term debts such as payments on car loans, student loans, or other installment debt (debts with more than ten months left to repay) should total no more than 36 percent of your monthly gross income.

Depending upon your household income, you may be eligible for special assistance programs. These programs may make it easier for you to get a larger mortgage loan than you normally would be able to using the above qualifying rules. Now, to get an idea of the mortgage amount that you might be able to qualify for based on your annual income, let's look at a calculation. You will need to know the approximate interest rate that lenders currently are charging for a 30-year, fixed-rate mortgage. Check the real estate section of your local newspaper or call a mortgage lender to get the current rates for your area. Then use our qualification calculator

This is the amount you could potentially borrow. Only you can decide whether you feel comfortable carrying the maximum amount of financing that you qualify for. And this calculation can only help you with the first qualifying rule – the amount of your home payment. It does not take into account the amount of your other debts. If they are high, that could reduce the amount of the loan for which you can qualify.

Give yourself a “+” if you think your family’s monthly income is enough to pay both your current monthly expenses and the housing payment you would owe if you bought a home. Give yourself a “–” if you do not think you would qualify at this time.

Have you been turned down for a mortgage?

If you have tried to buy a home, but were unable to get approved for a mortgage, you should try to find out why the lender did not want to make the loan. Based on the information above, you may already have figured out why you did not get a loan. Maybe you did not have a steady work history, or you tried to buy a house that was too expensive for your income, or your debt level is too high. If you are unable to figure out why you were turned down, you should ask the lending institution for an explanation. You should also ask what steps you can take so that you can qualify in the future. Allie Mae can give you advice.

You’re ready to buy a home. What do you do first?

If you have read all the information above, and have received a copy of your credit report, you may be ready to begin the process of buying a home. You may want to call a local real estate agent to show you homes in your area. You may also want to make an appointment with a mortgage lender. You can apply with an Allie Mae approved lender here. It will take some time working with a real estate agent to find the right home in the price range that you can afford. It will also take time to apply for the mortgage, have the lending institution evaluate your application, and have your loan approved. Still more time is required to do all the necessary paperwork and close on your loan. But in the end, you will have a home for you and your family, and you will have achieved an important part of the American dream.

You do not think you are ready to buy a home or you are not sure. What should you do?

If you took this test and received a couple of minuses, or you
weren’t sure about some the questions, don’t be discouraged.
You took the first step! The next step you may wish to take to
put your family on the path to home ownership is to contact Allie Mae for personalized advice.

Owning you own home may seem out of reach, but you can
change that over time. Even if you know you cannot qualify
now – or even six month from now – there may be a way you can work toward this important goal in the future. Nobody ever said becoming a homeowner was easy. It’s difficult, but it’s also rewarding. It can be worth sacrificing and planning over a long period of time to achieve it.

 

Allie Mae 02-01-2004

Step by step guide page 1

 

 

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By visiting Allie Mae you have taken your first step toward becoming an educated borrower. Allie Mae is an objective, independent source of information for the mortgage consumer. Whether you are buying a home, refinancing, taking a home equity loan, building a home or in need of a mortgage for any purpose, Allie Mae is here to help. Allie Mae has helped thousands of people with their mortgage needs. We have a complete selection of articles, charts, calculators, and checklists designed to help you through the mortgage and home buying process.

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