Epic Financial Corporation

Question 3: Two Stages of QualificationPRE-QUALIFIED:In this 1st stage, you supply a bank or lender with your overall financial situation, including your debt, income and assets. After assessing this information, a lender can give you an idea of the mortgage amount for which you qualify.They don’t pull a credit report, and this can be done over the phone.. Visit this Trulia article for the 6 Documents You Need to Have To Apply For a Mortgage.PRE-APPROVED:If you really want to look at homes with LEVERAGE, get PRE-APPROVED.In this 2nd, more complex stage, you’ll complete an official mortgage application, and then give the lender the necessary documentation to perform an extensive check on your financial background and current credit rating. The lender can then tell you the specific mortgage amount for which you are approved, and in some cases, you might be able to lock-in a specific rate.When pre-approved, you will get a conditional agreement in writing for an exact loan amount, allowing you to look for a home at that price level or below.Having this stage complete, sellers will know that they can confidently say ‘yes’ to an offer, and not have to wait for you to get pre-approved. Sellers LIKE this. Do it BEFORE you fall in love with a home.Question 4: FHA Debt-to-Income..
There are actually 2 ratios, and you need to qualify on both of them.
Front End Ratio:
Traditional mortgages require that your total monthly mortgage payment not exceed 28 percent of your monthly gross income, and that your total monthly debt payments — including your mortgage, car loan, student loans and other obligations — not exceed 31 percent of your gross monthly income(Back-End Ratio).However, the FHA increases these limits, allowing you to have a 31% housing expense ratio (Back-End Ratio) and a 43% total debt-to-income ratio.(Front-End Ratio). You can find these ratios by dividing your monthly mortgage payment by your monthly income (Front-End), or by totaling up your monthly debt payments and dividing them by your monthly income (Back End).FHA loans also require that you carry mortgage insurance, which is included in your monthly mortgage payment. The more expensive the home you buy, the more expensive the mortgage insurance will be.
Like other loans, you are also required to carry homeowner’s insurance, which includes paying the premium at closing, and to pay your property taxes in escrow.If you want an example of how to calculate your ratio,
visit the FHA site.Back End Ratio: With this ratio, the lender will consider all of your monthly debts including your monthly mortgage payments. They will also factor in car payments, minimum credit card payments, and any other bills that you pay every month (aside from utilities). They will divide your total debt by your gross monthly income to come up with a percentage. This percentage is your back-end debt-to-income ratio, and it’s a key part of the FHA underwriting and approval process. Some lenders will go as high as 45% – 50%, while others are setting the bar lower at 43%.image of mortgage approval stamp
Interested in FHA Financing? Most people end up using FHA loans because they only require 3.5% for your down payment. A disadvantage? You could pay mortgage interest for the entire 30 year term of the loan, while others can remove mortgage interest payments when they have paid off 20% of the home’s value. But DON’T let that keep you from investigating an FHA loan solution. It is likely the one bitter pill you’ll swallow, until you refinance the loan a few years later. Better than renting!