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Many people are confused about what exactly lenders look at to determine the mortgage amount you qualify for. Believe it or not, there is a method to the madness of determining what you're eligible for.
For starters, lenders are going to look at your credit score. The range is between 300-850. The better your score, the better terms you'll be eligible for on your loan. The ideal score is 720 or above. Fannie Mae's Loan-Level Price Adjustments dictate that the lower your credit score, the more expensive your mortgage will be. That's why it's crucial to keep your score above that 720 mark.
Lenders will also looks at your income. This is where your debt-to-income ratio will be really important. They will look at the total amount of money you owe for all of your accounts, the mix of amounts owed, and the number of installment loans that have balances, among other things. Lenders will also look at your available credit - if you have nearly maxed out your cards it reflects poorly on you and will affect the amount of money your are eligible for. We usually tell our clients that they should never owe more than $300 for every available $1000 if they are looking to get a loan.
You can get a copy of your credit report by going directly to the agencies that track it. These are Experium.com, TransUnion.com, and Equifax.com. Additionally, you can always contact a lender for a residential mortage report - just know that this will be slightly different than a consumer credit report.
If you want advice on how to manage your credit score, you can reach out to the three bureaus mentioned earlier or visit www.consumer.ftc.gov and search under the "money and credit" tab. If you want to have a more casual conversation about your options, we are always available to chat. Give us a call or shoot us an email, we would love to hear from you.
