Wonder how we calculate your income vs debt service ratio’s?
Wonder why a friend of colleague can qualify for a bigger mortgage than you?
Your final mortgage approval all comes down to Income vs Debt Service Ratio “TDS”
Many consumers assume that if they can afford their rent the banks should easily approve them for a mortgage payment that is the same or less than the current rent
This is not the case
When you are renting there is no income vs debt calculation done to qualify you for your home.
If you stop making payments you are evicted and the landlord rents the home to a new tenant
The bank will never lend to a consumer if they feel the affordability is not in line
It is a very expensive process for the home owner and the bank to foreclose on a home and they will always try to avoid that at all costs
Starting with approval based on Debt vs Income calculations
The bank uses your GROSS income to start the calculation
They only use a portion of what you make every month to go towards your total debt (42%-44% max depending on your past credit and current credit score)
The first and biggest mistake most consumers make – is they apply for a mortgage AFTER they have solidified a hefty vehicle loan payment.
Car loan approvals are based on affordability, but the approval is much looser and the ability to get a car loan is much easier.
If you do not make your car payment your car will be seized.
Many people drive very expensive vehicles- but they do not own a home.
This is because their car payment is applied to their overall “TDS”
If your car payment is $1000.00/month++ (more or less) this can seriously affect your approval ratios.
Once you have the brand new car its virtually impossible to get rid of the loan, as the car has decreased in value the second you pulled off the lot and you would be hard pressed to find a buyer for a used/brand new car to pay off that loan
RULE OF THUMB:
Buy the house and then the vehicle.
Once you are a home owner you will have little problem solidifying a car loan
But if you buy a vehicle first – this payment has to be added into the income vs debt equation limiting your ability to buy the house you want
Other things that can affect your approval or overall Debt vs Income ratios=CONDO Fees and Taxes.
Be sure to talk to us about the TYPE of property you are looking to purchase
If you are on the top end of your budget one property with condo fees of $200.00/month vs another property with condo fees of $275.00/month is enough to change the application from an approval to a decline.
The more we know about what you are looking to find the better we are able to prepare your file for final approval!
Another change that can really affect your approval ratios are any Lines of Credit or Credit card balances you carry.
OLD rules used to allow us to use your interest only payment in the application to qualify
NOW government rules for qualification have changed and we have to use a 3% repayment on all Lines of Credit and Credit cards
That means if you owe $10,000.00 on a Line of Credit I have to use a $300.00/month payment in your application (even if you are only required to pay $50/month)
This new rule has taken many consumers that have been approved for mortgages in the past by surprise as it seriously affects their affordability and qualification
Home ownership and the purchase process can be easily achieved with the correct short term and long term advice
Contact my office today at 306.933.3386 or APPLY online at www.elitemortgagechoice.com and have your pre-approval in place in less than 24 hours!
Tammy Wandzura, Mortgage Broker