How Much Can I Borrow - Check Your
Ratios
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| There is not a “cut and dry” answer to that question. With
traditional financing, the general rule of thumb has been to follow the 28/36
rule. This means that your house payment including taxes, insurance, and any
homeowner’s dues should not be more than 28% of your gross monthly pay (this is
called your “front end ratio”). Likewise, all of your monthly liabilities that
appear on your credit report should not exceed 36% of your gross monthly pay
(this is referred to as your “back end ratio”). |
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To Calculate:
Front End Ratio = estimate your monthly mortgage payment /gross monthly pay
Back End Ratio = estimate all of your monthly payments listed on your credit
report / gross monthly pay.
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| Your ratios are only one variable which determine how much you
can borrow. There are plenty of “No Ratio” loans on the market where the
lender does not look at your ratios for qualification purposes. AAXA even works
with a lender which will do 100% financing without looking at your ratios. What
you really need to ask yourself is “how much can I afford to pay each month?”
Start there and then call a couple of mortgage professionals and find out
exactly what programs and rates exist for your particular situation.
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Mortgage Pre-qualification and
Mortgage Pre-approval
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| In a today’s real estate market, sellers are typically looking
for some evidence that you are qualified to buy before they accept your offer.
Without a mortgage pre-qualification or home loan pre-approval letter, you may
find yourself at a competitive disadvantage if there are competing offers and
the other buyers have shown the goodwill of seeking out financing ahead of
time.
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| What is the difference between the two terms?
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| A mortgage pre-qualifications typically implies that you have
spoken with a lender or broker and, based upon the information that you have
provided, are qualified to borrow “X” amount of money. A mortgage
pre-qualification letter is a good start but often comes with some vague
language and a laundry list of “outs” that may not build confidence in the
seller’s or real estate agent’s mind. A mortgage pre-approval takes the process
to a new level. Mortgage pre-approval letters typically indicate that the
borrower has met with a lender or broker and that the borrower has been
approved for a mortgage with a very limited list of pending items (typically
the appraisal and final underwriting review need to be completed). Some
homeowners may not understand the difference but, believe us, most real estate
agents do and they have their customers’ ears. We suggest taking the time and
to obtain a home loan pre-approval. AAXA does not charge an application fee and
would be more than happy to provide you with a free mortgage pre-approval.
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Start the Home Loan Pre-Approval
Process
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Complete our Online Mortgage Application
or
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Call us toll free at 877-RATE-LOW (877-728-3569) for more information
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| First
time buyer mortgage |
| Rent
Versus Buy |
| Beginner
Mortgage Checklist |
| Credit
Scores and Mortgage Rates |
| Choosing
a mortgage company |
| Finding
the right real estate agent |
| Should
I consider 100% financing? |
| Pro
& Cons of adjustable rate mortgages |
| What
types of loans are available for the self-employed? |
| Why
do mortgage rates change? |
| What
is a mortgage broker? |