So you’ve decided to buy a house, or you want to take cash out or lower your payments. What do you need to do to find out if you can?
At this point in time, due greatly to the decline in real estate values and past lending practices that were poorly conceived, it is not so easy to get financing. Here are the basics;
Qualifying
Typically, a borrower needs at least enough income so that 50% will cover all monthly payments. Period. That means housing costs, called principal, interest, taxes and insurance (PITI) AND car loans, credit card payments, and any other debts that involve a monthly payment. In today’s market, this is the number one issue.
Downpayment or Equity
There are loan programs for people who have small down payments. These include FHA, VA, and HomePath loans. More typically, at least 10% down is required.
For refinance, with the exception of a few special programs, you need 20% equity to keep your loan balance the same and often less than that if you are seeking cash out.
For investor properties, that is, you will not be occupying the house, loan to value standards are lower.
Credit
Credit scores continue to be a major hurdle in borrowing. Really great credit, 800 or more, will in many cases get the absolute best terms. 760 is a more typical standard as “great” credit. Scores less than 720, 700, 680, and lower, limit both the availability of credit, greatest loan to value, and/or cost of credit.
The worst score factors are bankruptcy, foreclosure, default, mortgage late payments, other late payments, charge offs, and collection accounts. We can sometimes help improve your scores.
In order to evaluate your situation, we usually need documentation of your income, assets, and credit. Download our checklist and personal information worksheet for a no cost review.
At Coast Village, we never charge an application fee. If we can help, we do, if we can’t, we give you quick and polite feedback.