A pre-approval letter demonstrates to sellers that you are qualified buyer with verified financial backing. Having a pre-approval greatly increases your chance of having your offer selected.
Your debt-to-income ratio is derived by dividing your total monthly payments(such as credit cards, car loans), student loans) by your monthly gross income. This number turns into a percentage and becomes your debt-to-income ratio. Lenders use this to calculate how much mortgage payment you can afford as they typically want the number to be below 43%, but some programs allow it to be higher. Your lender can help you determine your debt-to-income ratio and review which loan programs you may qualify for.
Down payment amounts vary depending on the type of loan. For example, if you’re going with a conventional loan, typical down payment is 20%. However, you can put less down, but you may pay private mortgage insurance (PMI). Some loan types may require less of a down payment, such as only a 3% to 5% down payment. Federal Housing Administration (FHA) loans overlay require a 3.5% down payment, while the U.S. Department of Veterans Affairs (VA) loans may not require any money down.
PMI is for conventional loans and covers the lender if you stop paying your mortgage and default on your loan. The yearly cost of PMI is about 1% of your outstanding loan balance and is added to your monthly mortgage payment. You can eliminate PMI by paying 20% downpayment or request to have PMI removed once your outstanding balance reaches 80% of the original loan amount.
There are several government programs to help you afford a home. For example, VA loans, FHA loans and USDA loans are available to specific group of borrowers. Contact us to find out more.
According to USDA published rankings, Metroplex Mortgage Services, Inc. has been ranked #1 for 2017, 2023, 2024, and 2025.
