Buying a Home and Qualifying for a Mortgage
For anyone looking for orange county homes for sale there is a 2 step process that needs to be followed in order to ensure a successful purchase transaction. First is to sift through or feel out different orange county realtors to find the one that you believe fits your needs and is the most reliable. Secondly, you need to get pre-approved with a seasoned mortgage banker/loan officer. This pre-approval will go a long way to getting an offer accepted. In this sellers market, listing agents typically require a fully fledged pre-approval which sometimes must include the automated underwriting finding (DU findings). This means that all of your documentation has been evaluated and credit is sufficient enough to successfully secure financing for the home you are bidding on. Finding a good Orange county realtors is a process, and will be discussed on another day. Let’s assume, you as a buyer have completed step #1 and are already working with a realtor. Step #2 is crucial in determining whether you qualify for a mortgage and what type of program best fits your needs. Let’s take a look at the different types of programs available to buyers today: Fannie Mae Freddie Mac FHA USDA (rural areas) VA (veterans and reservists) Jumbo (loans larger than the highest loan amount on the previous program) There is one common determining factor between all of these programs when it comes to qualify, and that is INCOME! Evaluating a borrower’s income is the single most important factor when qualifying for a mortgage. Credit is important, however, there are programs that can approve a borrower with bad credit as long as the income is sufficient. The underwriter will dissect a borrower’s income and come up with a bottom line figure that they are allowed to use to qualify. That income is then divided by the amount of current debt the borrower has AND the fully amortized mortgage payment including taxes and insurance. When all is said and done, the Debt to Income ratio needs to be below 50% and often times closer to 40%. Debt to income ratio is the greatest evaluator of a buyer’s ability to purchase a home at any given price. Below is an example: Purchase Price of Home: $500,000 Down payment: 20% or $100,000 Total Loan Amount: $400,000 Mortgage payment PITI (principal, interest, taxes, insurance): $2340/mo. On a 30yr fixed @ 4.5%
Car payments and other credit card payments: $750/mo. The total proposed debt to buy the home would be: $2340 + $750 = $3090 $3090 / .5 (50%) = $6180/mo. Therefore: a buyer must be able to put down $100,000 and make $80,340 gross per year income. When searching for orange county homes for sale, it is imperative to know which program you qualify for by having your debt to income ratio evaluated, and being pre-approved. This is the best method to ensure getting an offer accepted and having the financing lined up to execute the purchase transaction. OC Home Funding can help with both steps. Please contact us at 949-891-0777 or info@ochomefunding.com or www.ochomefunding.com.