How large a mortgage can you afford? The size of a mortgage you can qualify to obtain will determine how much you can spend on purchasing a home. There are a variety of different factors looked at by banks when analyzing mortgage applications.
Debt – to – income Ratios
What is a debt to income ratio? There are two types of debt to income ratios. A front – end debt to income ratio and a back – end debt to income ratio. The front – end and back – end debt to income ratios are utilized by mortgage lenders during the mortgage application process. A front – end debt to income ratio is in reality a housing expense calculation. The theory is how much of an individual’s or family’s gross (pre tax) income can be utilized to make mortgage payments on a monthly basis. This front – end debt to income ratio usually runs between 28% and 33% of an individual’s or family’s income. This means that the financial institution will not approve your mortgage application if your debt to income ratio goes beyond the financial institution’s guide lines. This specifically applies to conventional loans and Federal Housing Authority (FHA) loans.
Back-end Debt to Earnings Ratio
The back – end debt to earning ratio is the percentage of you or your family’s gross (pretax) monthly income that will be utilized for debt service for your financial obligations. Financial obligations include your proposed mortgage, credit card bills, car loans, child support, and all other types of financial indebtedness in this ratio. The back – end debt to income ratio utilized by financial institutions in their mortgage underwriting process is usually between 36% and 40% of your gross monthly income. This means if your proposed new mortgage and other debts are more than 40% of your gross income, you will most likely get turned down for your mortgage application. In situations where there are assets in the bank and very high credit scores, financial institutions have been going as high as 48% on the back – end debt to income ratio.
Before you submit a mortgage application, you should calculate your front – end and back – end debt to earnings income ratios. This will give you a better idea as to whether you will qualify for the mortgage you are applying for.
First you get the loan, then you start making payments to the loan. But what happens if your financial situation changes? If you lose your job, become disabled, are downsized or have other financial problems, you may find yourself in a foreclosure situation. Do not dispair. The Law Offices of Schlissel DeCorpo has been helping families deal with foreclosure problems for the last 45 years.
We provide all aspects of foreclosure defense. We attend foreclosure court conferences on behalf of our clients. We litigate issues such as defective foreclosure lawsuits, predatory lending, defective mortgages and other significant real estate related defenses. We’ve developed an expertise concerning federal laws and foreclosure.
We can also help you deal with foreclosure-related bankruptcy issues. Filing either a Chapter 7 or a Chapter 13 bankruptcy may be necessary to deal with the foreclosure on your home. If you file bankruptcy, you can eliminate second mortgages in some situations, stop foreclosure, stop other debt collections practices and at the end of the bankruptcy, action can be taken to re-establish your credit. Feel free to call us for a consulation. Our phone numbers are 1-800-344-6431, 516-561-6645 or 718-350- 2802. Thank you for visiting our foreclosure defense blog.
Foreclosure rates have been climbing on Long Island for the past few months. The increase in foreclosure rates is related to lenders moving more vigorously to foreclose on homes after stopping for several months to review their practices to make sure they are in compliance with state and local laws. After employees from financial institutions admitted that they had signed foreclosure documents without reading them, New York state courts began requiring lenders and lawyers to scrutinize and check the paperwork they receive from their clients. State court judges have been aggressive in seeing to it that the lenders have all of the appropriate paperwork before they move forward with foreclosure proceedings.
