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Chrisman's Corner: The Current Guidelines Can Be Helpful to Borrowers

JMAC’s veteran brokers and AEs realize that qualifying for a mortgage today is easier than it was many years ago because today a homebuyer can not only buy a home with as little as 3% down, but can also spend more of his/her income on the house payment. With the higher home prices where many of our brokers operate, however, the cash requirements are significant and house payments are higher than rent would be.

Our brokers tell their clients that a few quick calculations will tell them whether or not they could be considering buying a home. The first calculation to make is to calculate one’s Long Term Debt ratio: the ratio of your monthly debts such as car payment, student loans, credit card minimum payments as well as the principal, interest, taxes & insurance (PITI) of a home they would like to buy, all divided by one’s gross monthly income.

With the current underwriting guidelines provided by Fannie Mae, Freddie Mac and HUD, a borrower with no other monthly debts can spend up to approximately 45 percent to 50 percent of household income on the PITI. Of course more income will be required if a borrower has other long-term debts such as car payments, credit card payments, etc.

Our brokers know that the cash requirement to cover the down payment and closing costs is one of the largest obstacles to home ownership. Closing costs can vary widely and depend on the chosen interest rate, how much the seller is willing to pay towards your closing costs and the size of the down payment and the borrowers’ credit scores.

Our brokers tell their clients that although some research can be done on the internet, it is also a source of bad information. Rates quoted on line cannot possibly take into account all of the variables that go into accurately pricing a loan, and using a local mortgage professional will make the home buying experience much smoother