Rochester Mn Real Estate Agents David and Lois Marris on Mortgage Applications
There are three main areas lenders review when you apply for a home loan:
- Income and Expenses
- Credit Score
- Down Payment and Closing Costs
Income and Expenses
Lenders will help you itemize your income and all of your expenses. They then calculate a debt to earnings ratio or "Housing Ratio". The Housing Ratio consists of the monthly housing payment to total gross monthly income ratio. This ratio is used by lenders to determine the maximum monthly payment a lender is likely to allow you to carry based on your income alone. To calculate your own Housing Ratio visit our web page Pre-Qual Calculator tool.
Credit Score
Your credit score is a number generated by the credit reporting agencies and represents your overall credit health. You can find your current credit score by visiting www.freecreditreport.com or www.annualcreditreport.com. As a general guideline, lenders would like to see a credit score of at least 650. If your credit score is lower than this, you'll want to improve your credit score by paying off debt and paying bills on time for 12 consecutive months.
Down Payment and Closing Costs
Right now, most lenders would like the buyer to have at least a 10% down payment when purchasing a home. If you have high credit and are buying a medium priced home, you may be able to find a 5% down loan pament. Jumbo loans (over $417,000) are often requiring 20-25% down payments. Your lender will take the down payment and closing costs into consideration when determining your qualification for a loan.
Mortgage related closing costs vary from lender to lender to it is important to compare vendors. A 1% origination fee is quite common these days and means you will pay 1% of the loan value as a closing costs. Some closing costs do not vary from vendor to vendor. Examples are a state deed tax, abstract update or title insurance costs, filing costs, etc.
We provide each buyer and seller with an estimated closing expense form to you will not be surprised by any costs related to the closing on your home.
Calculating Your Monthly Payment
Your monthly payment will depend on:
- Purchase Price
- Down Payment
- Interest Rate
- Property Tax rate
- Annual Hazard Insurance Cost
Visit our payment calculator to determine your monthly payment. Your payment will include your principal payment (P), Interest payment (I), 1/12th of your property tax payment (T) and 1/12th your annual hazard insurance payment (I). All together, we call this PITI: principal, interest, taxes and insurance.
Our web page offers more mortgage information and easy to use tools to help you with your home buying decision.
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Rochester MN Real Estate Agents David and Lois Marris are top REALTORs at Edina Realty. Edina Realty is the number one brokerage in Minnesota. Visit www.davidandloismarris.com to search for Rochester homes for sale. Contact: LoisMarris@EdinRealty.com, DavidMarris@EdinaRealty.com, 507-398-3251.
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