Two things are vital for the mortgage lender to know. The lender wants to know your payment history. In today's world, this is expressed as your credit score. The lender feels that if another bank repossessed your car last year and you have defaulted on a couple of credit cards in the past, it is unlikely that you will make your mortgage payments. If you have paid well on your car and your credit cards in the past, it is very likely that you will be approved for a real estate mortgage. You know whether or not you pay your bills on time.
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| Ron Climer at Keller Williams Realty in Hendersonville, N. C. |
It gets complicated when the bank looks at your total obligation ratio. If you are earning $6000 per month income and you already have debts the bank looks at your total obligations. . You already have a car payment and a boat payment and a ATV payment and a motorcycle payment and a credit card payment. All your monthly obligations including your house payment can not exceed 36% of your gross monthly income. $6000 x 36% equals $2160. If all your obligations exceed $2160, your loan will be disapproved. The mortgage lender does not assume that you will pay your house payment first. If you have these other obligations, the mortgage lender does not want to put you in a situation where you don't have enough money to pay all your bills. The maximum total obligations ratio is 36%.
If this is as simple as I describe, why do most Realtors require you to get a pre qualification letter from a mortgage lender before they will show you houses or submit your offer to a seller? The answer to this question is that many,many people forget that their car was repossessed last year or they forgot about that bankruptcy two years ago. When you enter into a contract with a real estate seller to buy his house, he takes his house off the market. No Realtor shows that house. It is marked 'pending' in the MLS. Mr. Seller wants to know for certain that the buyer has the financial ability to qualify for the mortgage loan. Don't be mad if Mr. Seller does not want to take your word for it. Mr. Seller having his house off the market can cost him several thousand dollars in interest and other carrying costs. This is serious.
Pre qualifying is better for the buyer too. After talking to a mortgage lender, many buyers find that they can qualify for a larger loan than they thought they could. Many buyers have the reverse experience. Either way, it is better to know the facts. If you can qualify for a $400,000 mortgage, you probably won;t find a $300,000 house that you like. Inversely, If you are out looking at $400,000 houses and you can only qualify for a $250,000 mortgage, that will only result in disappointment and frustration. Get yourself pre qualified before you start looking at houses.If you would understand this better with a video https://www.youtube.com/watch?v=Wy1Y7zDO3M4 Watch this. If you have a friend that is looking for a house, send this link to them.
At Keller Williams Realty Mountain Partners in Hendersonville, North Carolina, we have an in house mortgage lender right in our office. This pre qualification process is quick and painless. If I can help you get pre qualified or help you find your next house, call me, Ron Climer, at 828 290 1245 or www.ronclimer.com or www.hendersonvillekw.com
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