Los Angeles, Ca (PRWEB) February 28, 2013
For buyers trying to acquire loans, the loan process involves research into a buyer and his or her background - their debts and their income, and how this balances. With mortgage lending requirements getting tighter in the Los Angeles real estate market, buyers interested in Los Angeles homes for sale should seek the advice of a professional, skilled Los Angeles real estate agent to help them find an appropriate lender and ascertain debt to income ratio requirements.
Red Blue Realty offers some tips to help buyers meet more stringent requirements, and eliminate qualifying hassles.
Tip One: Mortgage Payment Costs versus Income
To prevent home buyers from purchasing a home they can’t afford, requirements and guidelines have been established to set debt to income ratios. These are used to determine if the potential borrower is in a financial position that allows them to own a home. There are two ratios: the first is mortgage payment expense to income.
This ratio works by adding the total mortgage payment of principal and interest, escrow deposits for taxes, hazard insurance, and mortgage insurance and dividing this total by the buyer’s gross monthly income. In order to qualify, the maximum ratio must be 31%.
Tip Two: Total Fixed Payment to Income
This ratio works in a slightly different fashion. The total mortgage payment should be added - principal and interest, escrow deposits for taxes, hazard insurance, and mortgage insurance premium as well as all other recurring monthly debt, such as car loans, education loans, and credit card payments. This total is added up, then divided by gross monthly income. The maximum ratio to qualify here is 43%.
Tip Three: DTI too High?
Banks and other mortgage lenders study how much debt a customer can handle before they could have financial difficulties. They utilize this knowledge to set their lending amounts. The preferred maximum Debt to Income ratio does vary from lender to lender. Once a borrower knows his or her DTI it can be assessed quickly.
To reduce DTI, debt must be lowered. Not only can high DTI cause a borrower not to qualify for a loan in the first place, it can also cause a borrower to receive a higher interest rate than a borrower with a lower DTI.
The key here is to reduce DTI.
Tip Four: Lowering the DTI
To lower the debt to income ratio, a skilled Los Angeles real estate agent can advise a borrower to do several things including: paying more monthly toward credit card debts, avoiding taking on more debt, and postponing large purchases until more savings are available to pay for items rather than making credit purchases.
Once these steps have been put into place, borrowers should recalculate debt-to-income ratios to see current standing. After all, low DTI helps ensure debt repayments are affordable and financial responsibilities involving a home purchase reasonable.
Phone Number: 1-(855) 66-RBREALTY or 1-(855) 667-2732