Don’t Fear the Lender!

Don't Fear the Lender3 Changes that Make Qualifying for a Home Loan Easier

In recent months, lenders have made it easier for first-time buyers and other would-be buyers to quality for a home load. Sure that sounds great, but what does it mean?

Because these  changes loosened lending restrictions, more would-be home buyers can become homeowners in today’s real estate market, Keep reading if you have high debt-to-income ratio, educational loan debt or think you don’t have enough money for a decent down payment. The changes that lenders have implement can help you secure a part of the American dream this year.

#1 Debt-to-Income Ratio

If you haven’t applied for a home load for awhile, there are some changes that could positively affect your ability to secure mortgage dollars today. If you have debt-to-income ratio is quite high, don’t lose hope. Under new rules set by Fannie Mae and Freddie Mac, the investors behind most mortgages who set the guidelines for qualify for home loans, your monthly debt-to-income ration can now be as high as 50%. That means if all your deb including your mortgage payment, car loan, student loan, credit card debt and other debts take up half of our income, in many cases you can still qualify for a home loan.

#2 Student Debt

One change that affets a large number of mortgage applicants is that lenders are no longer required to calculate a student loan payment as 1% of the outstanding balance of the student loan, which in many cases, can b a high number.

Instead, lenders can now use theamount listed on the applicant’s credit report, which is typically a smaller number, especially in the case ofthose who are covered by the invcome-based, reduced-payment plans. This is a huge change for those with school debt.

Previously, if the total student loan amount was $50,000, lenders would add 1%, or in this case, $500, to the applicant’s monthly debt load, even if the applicant was paying a required amount of just $75 monthly. Lenders now use the actual amount being paid towards student debt and this method will help many more borrowers with student loans secure mortgage dollars.

#3 Down Payments

Home buyers will also find more lenders being flexible on down payment amounts. The standard 20% down payment is rare (and often unattainable) and many lenders allow 3% down with some options for even less. The better your credit score, the more likely you can qualify for a mortgage with a lower down payment.

Don’t Forget

Keep in mind that just because a lender approves you for a certain dollar amount for a home load,you don’t have to use all that money. In face, you know your financial situation best. If the proposed monthly mortgage payment seems to high for your comfort level, consider finding a home that costs less and requires a smaller mortgage.

All lenders are not created equally. Therefore before you go house hunting – hopefully with yours truly, Lucy Garber – it’s a good idea to talk to several lenders to find out what loan programs you can qualify for and then get pre-approved for a home load. The pre-approval will tell you exactly how much money a lender will give you for a home. With this information you’ll save time focusing only homes within you price range.

Republished from Lucy Garber’s RE/MAX Estate Properties/HomeActions, LLC newsletter Vol. 22, No. 6.