Home Loan Essay

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5 Steps - How to Pre-qualify for a Home Loan
There is usually no best time to buy a new house. However, there might be wrong times, especially when the rates are on the higher side. The interest rate is one of the major components to be considered when buying a home. This is so as it determines the cost of the home. Therefore, it is not particularly advised that you wait for a period when the interest rates will be at their lowest. This is so as the factors that determine the interest rates are not controlled by individuals like you and me.
One of the factors that inhibit people from buying a house is the lack of enough money. In this case, it is advised that you ask some financial institutions for a teaser loan. Teaser loans come with a
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3. Determine your debt-to-income ratio - For persons that are familiar with mortgage loans, the term “ratio” will not be new. “Ratio” here tell you if you pre-qualified for a loan or not. If you have the necessary information and you know how to do the calculation, you can arrive at the ratio yourself. However, if you do not know how to get the ratio, you can seek the help of your lender.
To get the ratio, all you need to do is to add all your debts and compare the total to the total sum of your income. There are two ratios that you need to pay attention to: (1) the front-end, and (2) the back-end ratio, respectively.
Front end ratio refers to the number or percentage that corresponds when you divide your gross monthly income by the proposed housing expense. In short, what’s the relation of expected monthly mortgage payments (principal, interest, taxes and insurance) against your gross monthly income?
For you to get the best mortgages based on interest rates, your front-end ratio must be less than 26%. The chances of getting qualified for a loan is significantly reduced if the ratio is higher than 36.
The back-end ratio refers to all your monthly installments and revolving account payments, plus the proposed housing expense, divided by your gross monthly income. The rule is 45% or less; if you do, then you have a great chance of qualifying for a mortgage. If your back-end ratio exceeds 50%, it will be extremely difficult to qualify
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