Factors that Determine Your Eligibility for Boca Raton Home Loans
Whether you are a seasoned investor or a first-time homebuyer, without the proper roadmap for your Boca Raton Home loan, the mortgage approval process can become a bit overwhelming.
When getting mortgage financing you need to arm yourself with the best information before approaching a mortgage lender. This article will cover some of the basics of what you need prior to getting a mortgage approval as well as what you can expect to find in a prequalification letter.
When giving you a mortgage, lenders will rely on established guidelines whose terms are normally determined by mortgage approval.
Below are some of the factors that play a key role in the mortgage approval process.
Debt to Income Ratio
Otherwise known as a , debt to income ratio refers to a borrower’s income compared to their housing liabilities and monthly credit. A low borrower DTI (that is if what a borrower spends in a month is low in relation to how much income they have), makes the lender confident that they will be able to make their monthly payments on time.
Loan To Value Ratio
To hedge their risks, sometimes a lender might insist that the borrower makes a down payment larger than 20%. Otherwise, the borrower will be forced to take mortgage insurance. This varies from one home loan to the next.
Some home loan programs from the government are designed to help buyers secure financing for their home even with a 96.5% LTV ratio (FHA home loans) or 100% LTV ratio (like VA home loans).
When you apply and qualify for a conventional home loan you are required to buy mortgage insurance if your LTV ratio is higher than 80%.
To avoid purchasing mortgage insurance on a conventional home loan, the borrower would have to make a 20% down payment.
Lenders use credit scores found on a borrower’s credit report to determine the amount of risk associated with the borrower for Boca Raton Home Loans.
Some lenders consider whether the borrower has multiple open lines of credit while other lenders will look at alternative forms of credit including rental history, medical bills, utilities, and payment of insurance premiums.
The kind of property you are applying mortgage for and whether you plan to occupy it as a residence also plays a critical role in securing mortgage financing.
Note that your real estate agent needs to fully understand any restrictions that might apply to your prequalification letter before making any offers on the property.
Another factor that plays a crucial role in the mortgage approval process is the mortgage program you are applying for. This is because every mortgage program has its own guidelines that the borrower has to meet before approval.
There are different kinds of mortgage programs such as FHA and VA home loans that are insured by the government as well as jumbo and conventional home loans.
When helping you determine which Boca Raton Home Loans program best suits you, NHL Lending takes LTV, DTI, Property type and credit score into account.
Understanding the Basics of a Pre-Qualification Letter
An essential first step in the home purchasing process is receiving a prequalification letter from your lender. Basically, the prequalification letter is a written communication to the seller and agent from the loans officer that the borrower meets the conditions for a given type of home loan program.
Some things that are included in a prequalification letter are:
- Loan amount –this is usually the total amount of money the lender is willing to give you depending on the guidelines for the type of home loan program you qualify for
- Occupancy – Indicates whether the property will be occupied by the owner, act as a secondary residence, or if it is an investment
- Conditions – This refers to the funding and document requirements that will happen prior to approval
- Mortgage type – There are different types of home loans such as FHA, Conventional, Jumbo, or VA. The pre-qualification letter will indicate which of these loans you qualify for.
- Status and expiration dates – Prequalification letters have a shelf life of approximately 90 days from when your credit report was run.
- Contact information – This refers to the name and address of NHL Lending
- Term – This shows the amount of time it will take to clear the loan. NHL Lending offers 30 and 15 year fixed interest rates home loans as well as a 5/1 adjustable rate mortgage. The interest rate on our adjustable-rate mortgage is fixed for the first five years and thereafter is adjustable every year. The adjustment can either be up or down.