Things are moving so quickly in the market with the coronavirus being at the forefront, everyone is feeling hardship across the board.
FHA Loans provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. It is one of the largest insurers of mortgages in the world, insuring more than 46 million mortgages since its inception in 1934 and it's the only government agency that operates from its self-generated income.
Self-generated income which means the Mortgage insurance premiums that is collected from borrowers via lenders are used to operate the program.
FICO scores tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk by utilizing a FICO formula.
The most commonalty used :
Equifax Beacon 5.0
Experian/Fair Isaac Risk Model v2
TransUnion FICO Risk Score 04
We’re seeing what’s “good” for rates can be bad for lenders, and what’s “good” for the market can be bad for home buyers. This tug of war has caused servicers to implement drastic measures to keep up; includes raising the minimum FICO. If you have questions or concerns please contact your lender right away.
Your debt to income ratio or DTI, is a figure that allows a lender to analyze your monthly spending habits. They use your DTI to determine how you manage your money.
You want your debt to income to be as low as possible to ensure that your chances of being offered a lower rate is better.
How much debt do you have this month?
Think about all of the bills you have to pay for the upcoming month.
For example, Brandi pays $720 monthly for rent, $235 monthly for her car note, $200 monthly for her car insurance, and she makes about $100 monthly in credit card and utility bills. Brandi earns $4000 every month before taxes. So if we add up Brandi’s debt expenses and divide them by 4000, we get approximately 31%.
An article from consumerfinance.gov recommends keeping your debt to income ratio below 43% based on evidence from studies on mortgage loans. So when our friend Brandi is ready to move from her apartment into a new home, the bank will be eager to get things started for her, knowing that her debt to income ratio is low and that she has the ability to repay her loan.
Another factor that can help your debt income ratio is paying your bills on time and in full. Most banks offer the option to have money from your account wired directly to the institution you wish you pay. You can even customize the time and date that the wire will be released. As a result, before applying for a mortgage loan be sure that the job you are currently holding will provide you with the means to pay your current bills and a house payment.
Higher income means more flexibility to play around with financing options. What lenders don’t want to see is that you spend six months at every job and then bail. It shows instability and lenders won’t be so open to lending their money to someone who is in the business of making risky decisions by jumping from job to job.
Be sure to use that steady job to help build your savings. Why? Because of a thing called a Cash Reserve. Your cash reserve is your safety net. Money that you have saved up between your bank accounts will be evaluated by your lender. This extra money lets the lender know that if you fall on hard times or your expenses for some reason go up, you will still have the money to pay your household bills and still make regular payments on your loan, therefore keeping your DTI constant.
What lenders typically look for is a cash reserve that will hold you over for two or more months, so be sure to pad those savings accounts.
A meaningful proportion of current student loan borrowers will likely be flirting with a risky DTI just from student loan debt. 16% of Student Loan Borrowers Will Likely Have a DTI Over 20% Just From Student Loans. Below shows sample data from Lendedu: 10,000 pre-qualification applicants used.
The above statistics derive from proprietary data provided to LendEDU by student loan lender Funding U. DTI ratios for nearly 10,000 pre-qualification applications for private student loans were calculated by Funding U using metrics like projected first year salary, projected student loan debt upon graduating, and projected monthly student loan debt payments
Debt to income is an important factor when applying for a home loan. Be sure to take this critical component into consideration when you go to speak with your lender.
An important part of purchasing a home, aside from the financial considerations, is a home inspection.
We've provided is a general list of what to expect and what to look out for.
You need to vet the inspector just as you would with a contractor.
During this time, take note of your own observations, too. You should always do your own initial inspection before making an offer also, ensure you hire a professional.
Your home inspector should be willing and able to explain things more than once until you feel confident you understand the issue and potential solutions.
Note: This information is provided as a courtesy and is for informational and entertainment purposes only. Contents of this website are subject to change without notice. This content is not intended to replace official resources.