The 4 Numbers that Mortgage Lenders Want to Know

When you think of buying a Livonia house the number that you most likely think of is the budget for the house you are going to buy. However, unless you have cash to pay for that Livonia house the real numbers you should be concerned with first are the ones that the mortgage lenders are going to be looking at.

It’s the lender’s job to make sure they are only writing loans to Livonia buyers that are a safe risk to loan money to. With that in mind, here’s what mortgage lenders are going to look at:

1. Your credit score

Credit scores range all the way up to 850. If you want to have a great mortgage with a low interest rate you need to be as high as you can be. If you are over 760 you are going to stand out to mortgage lenders and will be able to obtain the best rate. A score that is over 700 will typically  be around the same rate or just .25% higher.

On the other hand, if your score is below 580 you will most likely not be approved for a mortgage. This score is low enough that lenders will not feel that they can trust you to make payments on time. When mortgage lenders see lower scores they think you are a risk to default on your loan. If your score falls between 580 and 699 you have a chance of being approved, but your interest rate will be on the higher side.

2. Your debt-to-income ratio

Your lender is going to want to see how much debt you are carrying. Even if your credit score is good they are going to want to see that you have enough money coming in to cover all of your expenses that you have.

A lender will look at all of the debt commitments that you currently have and the amount of income that you have coming in each month. They will divide your current debt by your income to get your ratio. The rule of thumb is that this ratio should remain no higher than 36 percent.

3. Down payment

Mortgage lenders like to see a large down payment, especially for people that have lower credit scores. The traditional down payment is 20 percent of the purchase price of the Livonia house, but there are some programs that allow you to pay less.

But, keep in mind if you have less than 20 percent equity in your Livonia house you will be required to pay Private Mortgage Insurance each month, which will increase the amount that you need to spend.

4. Assets

Lenders need to know that you are going to be able to cover your loan. Therefore, they are going to want to know what type of income you have and what sources it is coming from.

If you have a large sum of money in the bank and just don’t want to spend it on a Livonia house this makes you look like a safer risk to a lender versus a buyer that has no assets.

Before you start looking for a Livonia house you need to understand these numbers and the impact that they can have on buying a house. Talk to a lender early in the process to see if you can get pre-approved. If you can’t, work on improving these four numbers and try again.