If you're getting started in the mortgage process and want to get a better feel for the numbers in your personal situation, this mortgage qualifier can help you out.
With a few simple details it will help you estimate the mortgage amount you qualify for, guiding you in your search for the perfect home.
Look over our frequently asked mortgage qualifier questions to get a better understanding of today's mortgage requirements and how the process works.
Using a mortgage qualifier calculator can be a great tool for those who are interested in finding out what they can afford.
Your ability to get a mortgage depends on a number of factors, most of them listed in this guide, and our calculator compiles those factors to give you a good estimate of your options.
Different lenders will give you different numbers, but if you were to take an average of the numbers that you get from lenders, it is likely that that number would be what the calculator gives you.
Things like purchase price, monthly payments, tax rates, down payments, and more are all available to throw into your equation.
Your mortgage requirements will depend on the state and specifications of the mortgage you're looking for. Typically, though, there are a few things that you will need to qualify for a mortgage.
In general, you need two years of employment history, a credit score of at least 620, no bankruptcies, judgments, or collections within two years, and a debt to income ratio of under fifty percent.
The debt to income ratio can be a complicated figure if you have a number of different debts and incomes. That number can be calculated with a bit of online help.
You can buy a house without a down payment in-hand, but it's typically best to go into the situation expecting to have one. The more money you can put forward to a down payment, the more you're likely to get approved for the mortgage.
A term that comes into play here is the "loan to value ratio." This is essentially the amount of the loan taken out on the mortgage compared to the value of the home. Your down payment will sway that ratio in your favor.
Typically, a loan to value (LTV) ratio of 80/20 is ideal.
This means that the value of your loan comes out to about eighty percent of the value of your home. If you can find a down payment of twenty percent of the value of your home, you won't have the additional cost of mortgage insurance.
Private Mortgage Insurance is a requirement for mortgages over 80% LTV. It protects a lender from any losses, should a borrower be unable to make his or her payments.
Getting a better mortgage rate can depend partially on which lender you go through, but it is mostly related to how well you have handled your finances.
A good mortgage rate comes if you can improve your credit score. This may take a little time to develop, but the rewards of waiting to buy may be well worth it, especially if you plan to get a decent home.
You can do this by improving your spending habits, making sure you pay on time and spending less than thirty percent of your available credit at any time.
You should also show that you have a record of employment and reliable means of income. Doing this shows that you are good for your word on payments and won't cause the lender difficulty in the long run.
Another way to make the lender happy, in turn getting a better rate, is to pay more on your down payment.
We've mentioned this before, but having twenty percent of your mortgage to put in as a down payment is an exceptionally good thing in the eyes of the lender.
If you're positive that you're going to stay in your house for a long time, you have another option that will also lower your payment.
Namely, you can sign up for a longer mortgage.
In general, the longer the mortgage, the lower your rate will be.
This comes at a price, though because 15 years down the line, you may not want to be living in the same house you do right now.
This is an area that you should use caution in, because now more than ever, people are moving a lot and settling down for shorter periods of time.
To get a feel for whats best for your situation, try a mortgage comparison calculator to see your options side by side.
Pre-approval is different from pre-qualification, although the terms are often used interchangeably by mistake.
Pre-qualification can be taken care of without the agency going over your credit, social security number, and other information.
Pre-qualification gives you a rough estimate of your options and what is available to you.
The pre-approval comes when you're actually looking into buying a home, as potential lenders will assess your credit, social security, and overall finances.
When you're ready to start seriously looking at houses, you should consider getting pre-approved.
Getting a pre-approval allows you to know precisely what price range you're in, allowing you to narrow down your search and shop with confidence.