Four months ago, I applied for a mortage. Here were my stats then:
- No co-borrower
- Credit score of 690
- $450 in monthly debt payments (car and credit cards)
- Gross montly income of $2800
By my local credit union (where I bank), I was offered $125,000. Since this number wasn't suitable to me, I paid off some debt and got a higher paying position. My new stats are:
- No co-borrower
- Credit score of 715
- $167 in monthly debt payments (car payment only)
- Gross montly income of $3200
I went back to my credit union feeling pretty confident they would offer me more. I mean, why not? I have over $500 more each month than I did the first time! That should mean that I can afford $500 more for a mortgage payment right? WRONG.
They only offered me $127,000.
Can someone PLEASE explain this???
Anyone with similar stats who got a higher offer with another mortgage company? Anyone in the field who can offer a solution?
THANKS!!!!
2007-07-09 04:28:32 · 7 answers · asked by OceanGirl99 2 in Business & Finance ➔ Renting & Real Estate
Hi,
Looking at everything, the only possible explanation I can come up with is interest rate change. Over the past 4 months, interest rates have shot up dramatically, almost 1% for a conventional loan.
Basically, if you qualified for a mortgage 4 months ago at 5.875 rate, you would be paying $740/month in mortgage payments for the $125K loan.
Take the more current rate of about 6.75%, with a 127K mortgage and you are looking at a mortgage payment of about $825/month.
Also, your credit card payments are only figured out for underwriting purposes at about the minimum payments due. Although you might have been paying back about $280/month, you could probably have done minimum payments around $50/month. Therefore, the credit card payoffs probably didn't help you to much.
Finally, mortgage companies use a formula called PITA (Principal, Interest, Taxes, and Insurance) which helps calculate what you'll qualify for in regards to mortgages. It ranges from 28% - 33% of gross income, and based on 30% of gross income, you will qualify for about $960/month in mortgage payments (including homeowners insurance and property taxes).
Basically, what they quoted you is spot on in qualifications. You do, however, have several options to purchase: Save up more money for a down payment, buy a smaller house, or do a lease-to-buy property.
Good luck!
-Dave
2007-07-09 06:35:05 · answer #1 · answered by drp2505 2 · 0⤊ 0⤋
Several factors affect how much credit you are extended: how long you have been on your job, monthly salary, how much of a down payment can you put down. None of these factors were mentioned. What you have accomplished is great! I am no lender or even in the mortgage business, but I would recommend you wait awhile until you have increased all these factors. In the meantime, do not get in further debt! If paying by credit card, pay off balance monthly; and, do not forget that in many states utility companies are now reporting to credit bureaus, so make sure you pay them timely as well.
2007-07-09 04:42:54 · answer #2 · answered by onyxbabe1959 2 · 0⤊ 0⤋
If you figure you principle, interest, property taxes, and homeowners insurance and a thirty year fixed interest loan for $127000 you would making a loan payment with more than half of your gross monthly income! Why would you want to do that?
You have a great credit score so I guess you know how to handle your money, but I want money left over after I make my car payment and house payment so that I can buy electricity, gas, food and clothes.
Don't get sucked into an adjustable interest rate! Read what is happening to the people that did that and are now having their homes repossessed.
2007-07-09 04:48:27 · answer #3 · answered by glenn 7 · 0⤊ 1⤋
I would shop around. Get proposals from several lendors. You never know which one will give you a good deal and which one won't. It depends on your situation, how they read your situation, and how anxious they are to make loans this month. Sometimes there is no understanding why the lendors work like they do, just go with the flow.
2007-07-09 04:51:36 · answer #4 · answered by hottotrot1_usa 7 · 0⤊ 0⤋
The number sounds about right. With decent credit normally you can borrow up to about 3.5 times your income.
Many banks go higher.. just try another bank.
2007-07-09 05:14:01 · answer #5 · answered by Anonymous · 0⤊ 0⤋
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2007-07-09 05:13:56 · answer #7 · answered by Anonymous · 0⤊ 0⤋