Pre-Approval
Buyers should confer with their accountant and investment advisor.
Financing Pre-Approval is essential.
A lender will consider three main factors:
- Income and debt. This will determine how much a buyer can afford per month for Principle, Interest, Taxes, Insurance (PITI).
- How much money a buyer has for a down payment and closing costs.
- A buyer’s credit history.
Some lender concepts:
- Loan-To-Value (or LTV): This represents the loan as a percentage of the purchase price. If you are purchasing a property for $1,000,000 and you get a loan for $800,000, then you have a LTV of 80%. The higher the LTV, the more difficult it is to obtain the loan because your lender will place tighter restrictions on the three factors listed above.
- Housing Ratio: This represents your total housing expenses, Principle, Interest, Taxes, Insurance (PITI), divided by your gross monthly income. Lenders will request proof of your income through tax documents.
- Debt Ratio: This represents your total monthly obligations for your property, PITI, plus your monthly payments on your debt. Debt includes for example, student loans, auto loans, alimony/child support.
Buyer’s will complete a Uniform Loan Application ( Sample URLA ). The lender will then pre-qualify you for a range and discuss loan options and rates, closing costs, and closing timing.
Buyers should shop around to find the best rates, and find a qualified lender. We can recommend lenders and mortgage brokers.
