Record-low mortgage loan rates are driving a scorching hot real estate market, despite the COVID-19 pandemic gripping the world. Southwest Missouri is having a record year for real estate transactions as people are buying and refinancing homes while the low rates continue. Today’s blog from Volt Credit Union explains how a credit union determines your mortgage loan amount.
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How much debt do you currently pay on? Do you have an auto loan, credit cards, medical bills, or any short-term debt? How much of your income goes towards paying debt?
Generally, your debt-to-income ratio should be 36 percent or less. This includes any anticipated mortgage loan payment. Let’s say you pay $700 in debts every month on a gross income of $4,000. Your debt-to-income ratio is 17.5 percent. That leaves 18.5 percent, or $740, for a mortgage payment.
Volt Credit Union will examine your debt-to-income ratio. In general, lenders aim for housing expenses (rent and utilities) of no more than 30% of your monthly income. For example, your monthly gross income is $4,000 a month. Your mortgage payment plus utilities shouldn’t be more than $1,200. Some lenders may stretch that percentage up to 40 percent, but those types of loans are riskier.
Credit History and Payments
Your credit score is a big deal for many lenders. But Volt Credit Union takes a different approach. We take a look at how you’re doing with your current finances, not if you messed up 10 years ago or had some kind of financial trouble in the distant past. We take a holistic approach and what’s going on now and what happened recently to determine if you’re creditworthy for a mortgage loan.
Many lenders require a down payment before buying a house. Exceptions are for U.S. military veterans with V.A. programs or first-time buyers. We’ll take a look at your situation and see what’s available. If you don’t qualify for no down payment, the minimum amount for a down payment starts as low at 3.5%. For a $200,000 home, that’s $7,000.
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Talk to Volt Credit Union About a Mortgage Loan
Volt Credit Union can help you apply for a mortgage loan. If you want to improve your spending habits, debt-to-income ratio, or recent credit history, we can help you manage that aspect of your finances before you pre-qualify for a home loan. Contact Volt Credit Union or call (417) 862-0471 for more information.