Mortgage rates have slid two weeks now but started creeping higher this afternoon. Underwriting is still a more challenging process than ever with customers with high 700 scores and equity being pulled through the wringer. The best way to assure loan approval is to pay down your debt and/or increase your income. That is the key to financing the dream home you have your eye on.
If you do a conventional loan, in other words not a FHA or VA loan, in order to be eligible for mortgage insurance companies to buy the deal you must not have a debt ratio higher than 41% unless you are putting 20% down on a purchase. Divide your gross annual earnings by 12 to get your monthly gross. Divide your new mortgage payment, taxes, homeowners and any mortgage insurance into that monthly gross number. That is your back end debt ratio. The lower the better. And if its over 41% you need to do an FHA loan, find a cheaper house or add another borrower. BY the way, all your car payments, installment accounts, student loans and credit card minimums need to be factored in as well.
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