Mortgage Loan Primer

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Mortgage Loan Primer

Credit:

Credit scores range from 350 (Risky) to 950 (Less Risky). These numbers are based on your past credit performance in paying credit card bills, car loans, and other credit payment situations. These are the scores that determine lending qualifications including types of mortgages available, interest rates, and restrictions.

LTV (Loan to Value):

The LTV is arrived at by dividing the loan amount by the appraised value. For a purchase, the lesser of the appraised value or the purchase amount is used to find LTV. Just about all mortgages require at least a five percent down payment from the buyer. The LTV also has a significant impact on interest rates, just as credit score does, and loans available. There are many ways however to structure a home loan for 100% of the purchase price.

DTI (Debt to Income):

The DTI ratio is the result of dividing all of the borrower's current monthly obligations (credit cards, etc.), including all mortgages, by the total gross income. Banks prefer to lend mortgage funds based on a maximum DTI ratio of forty five percent. Income is proved by providing proper documentation including pay stubs, bank statements, and tax returns. Oftentimes a borrower who is either self-employed, a tip earner, or an investor, cannot provide these documents and may find it necessary to use a program that will permit them to attest to their income and assets in exchange for different non-conforming loans that base the interest rate on the level of risk the bank is underwriting.

Please call today at 702-376-0088.