How much do I qualify for?
There are two ways to answer this question – purely by the numbers, using a quantitative approach, or by looking at a borrower’s own comfort level with different degrees of debt (the qualitative approach). By asking a few basic questions about your income, assets, and credit, we can tell you in 30 seconds flat how much mortgage money you would qualify for.
However, is that the same as how much you should borrow? That depends entirely on you. Many people don’t want to borrow “the max”. Maybe they don’t want to be tied down to high monthly payments. Maybe they want to keep overhead low because they’re saving for college. Maybe they want to start a family and one parent will stop working to stay home with young children. There are many many things to consider when determining how much you qualify for.
But if you just want to know how much you qualify for, here is the information your loan officer needs:
Your income: what do you do for a living? Are you salaried or self-employed? Do you have a W2 job but you also freelance for additional income? Are you living off Social Security or pension? Do you routinely get bonus, overtime, or commission income?
INSIDER’S TIP: you typically need a two year history of earning bonus, overtime or commission income to be able to use it to qualify.
A good loan officer will not only ask you how much you make, but they’ll ask how you make it. Why? Because to accurately calculate your debt-to-income ratios, they need to establish what is your stable, recurring income. That’s what Fannie Mae calls it – stable recurring income — your income that’s available to pay your bills. So if one year, you did an incredible job at your company and got a $100,000 performance bonus, but you’ve never gotten it before and you’ve never gotten it since, that’s not stable and recurring and it won’t be used as income.
Your downpayment: how much can you put down? Is it all your own savings? Can you get a gift? If you’re buying a house, many programs allow you to get a gift to supplement your own savings, whereas some programs want the entire downpayment to come from your own savings.
INSIDER’S TIP: you can always borrow secured against your own asset to get money for your downpayment.
This means you can borrow against your own 401k or IRA or you can borrow against a property you already own. This type of borrowing is an acceptable source of funds for downpayment.
Your debt: do you have any car loans? Car leases? Student loans? Credit card debt? In order to determine how much you qualify for, your loan officer needs to know how much other debt you’re carrying each month. If you have virtually no debt, you can qualify for more mortgage money than if you had debt.
INSIDER’S TIP: if you have an installment loan (car loan, student loan, boat loan) with 10 months or less left on it, the underwriters will not count this debt against you. It’s like it’s not even there.
How is your credit? What is your credit score? If it’s low, is it being dragged down by having too much revolving debt? Do you have any items that are being disputed that are hurting your score? Would your score improve by paying off certain items or resolving a collection account?
INSIDER’S TIP: If you’re buying with another person who has a better score (one that would qualify you for more money or a better rate or both) and that person can carry the mortgage on their own, you can both still buy the property but only the higher score person would be on the loan application.
For a specific answer to how much do YOU qualify for, call Amerifund at (888) 650-7316 or fill out this form and someone will contact you.