3 important facts about home loans. Page 2

Another item a typical lender will look at is your "debt to income" ratios, which means the

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combination of all your reported credit, including house payments, credit cards, car payments and any installment loans minus the amount of your gross monthly income equals your debit to income.

Most lenders prefer no more than 40%; however, many lenders will go as high as 50% to 55%. If the lender goes as high as 50% to 55%, your interest rate will probably be higher as you are considered more of a risk, even if your ( mortgage quotes ) credit score is considered good. This means that your total outgo is between 50% and 55% of your total income each month.

Does anyone remember the old rule, back in the 1950's and 1960's that ( mortgages ) your total house payment should be no more than one week's paycheck? That rule doesn't apply any more but you really should look at your total house payment not being too much over 30% of your monthly income. That does not include your other debt.

Here is something to think about when you are getting a new home loan. Do you really need to buy a car right now? Yes, buying a car can really bump your debt to income ratios, especially with the price of cars today. This will affect how high of a loan amount you can get, therefore, when buying a house, if can affect the price you can afford to buy.

The next thing you want to be prepared for is your assets. This includes cash in the bank, retirement accounts, stocks and bonds, etc. I bring this up because, most lenders require what is called "reserves". These are funds you have on hand to pay at least 2 months of your house payment, including taxes and insurance, in the event something were to happen and you couldn't make the payment from your normal income. Each lender is different, but you should have a least 2 months reserves available. Even if the reserves are in a retirement account, that's usually OK.

Keeping all of these items in mind when going for a new home loan you will protect yourself from being surprised during the course of the loan process.

Just remember the debt to income ratios, your credit score and assets or cash on hand and you'll be in a great position to get exactly the loan you want.