Get Approved for a Mortgage in Harrisburg PA

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Real Estate Agent with First-Time Buyers, Residential Resales, New Construction

 

Get Approved for a Mortgage in Harrisburg PA: I wish it were that easy!  There are 4 basic things that a borrower needs to show a lender in order to get approved for a mortgageEach category has so many what ifs and sub plots that each box can read as its own novel.  In other words, each category has so many variables that can affect what it takes to get approved for a mortgage, but without further adieu here are the four categories in no particular order as each without any of these items, you're pretty much dead in the water.

 

 

Get Approved for a Mortgage: Income

You need income to get approved for a mortgage.  You need to be able to afford the home.  Without it, forget it!  But what is acceptable income?  Basically, it all depends on the type of loan that a borrower applies for.  Jumbo, V.A., USDA, FHA, Conventional, Super Jumbo?  Let's just say that there are two ratios:

  1. First Ratio - The first ratio, top ratio or housing ratio.  Basically that means out of all the gross monthly income you make, that no more that X percent of it can go to your housing payment.  The housing payment consists of Principle, Interest, Taxes and Insurance.  Whether you escrow or not every one of these items are factored into your ratio.  There are a lot of exceptions to how high you can go, but let's just say that if your ratio is 33% or less, generally, across the board, you're safe.
  2. Second Ratio- The second ratio, bottom ratio or debt ratio includes the housing payment, but also adds all of the monthly debts that the borrower has.  So, it includes housing payment as well as every other debt that a borrower may have.  This would include, Auto loans, credit cards, student loans, personal loans, child support, alimony....basically any consistent outgoing debt that you're paying on.  Again, if you're paying less than 43% of your gross monthly income to all of the debts, plus your proposed housing payment, then......generally, you're safe.  You can go a lot higher in this area, but there are a lot of caveats when increasing your back ratio.

What qualifies as income when you're trying to get approved for a mortgage??  Basically, it's income that has at least a proven, two-year history of being received and pretty high assurances that the income is likely to continue for at least three years.  What's not acceptable? Cash income, short term income, and income that's not likely to continue. 

Get Approved for a Mortgage: Assets

For the most part this is fairly simple.  Do you have enough assets to put the money forth to qualify for the downpayment that the particular program asks for?  USDA says that there can be no money down.  FHA, for now, has a 3.5% downpayment.  Some loans require 20% down to get approved for a mortgage!  These assets need to be validated through bank accounts and sometimes gifts.  Can you borrow the down payment?  Sometimes.  Generally if you're borrowing a secured loan against a secured asset you can use that.  But rarely can cash be used as an asset.  TALK TO YOUR LOAN OFFICER FIRST when discussing what's acceptable.

Get Approved for a Mortgage: Credit

Whew.  When trying to get approved for a mortgage, this can be the bane to every borrower, every loan officer and every lender......and yes, to every Realtor.  How many times has a borrower said my credit's good, only to find out that it's not nearly as good as a borrower thinks or nearly as good as the borrower needs.  Big stuff for sure.  620 is the bottom score (again with few exceptions) that lenders will permit.  Below a 620, then you're in a world of hurt.  Even at 620, people consider you a higher risk that other folks and are going to penalize you or your borrower with a more expensive loan.  700 is when you really start to get in the "as a lender we love you" credit score.  720 is even better.  Watch your credit!!!!! 

Get Approved for a Mortgage: Appraisal

In many ways this is the easiest box when you want to get approved for a mortgage.  Why?????  Generally, there's nothing you can do to affect this.  Bottom line here is....."is the value of the house at least the value of what you're paying for it?"  If not, then not good things start to happen.  Generally you'll find less issues with values on purchase transactions; because, in theory, the Realtor has done an accurate job of valuing the house prior to taking the listing.  The big issue comes in refinancing.  In purchase transactions, the value is determined as the Lower of the value or the contract price!!!

That means that if you buy a $1,000,000 home for $100,000, the value is established at $100,000.  Conversely, if you buy a $200,000 home and the value comes in at $180,000 during the appraisal, then the value is established at $180,000.  Big issues....Talk to your loan officer.

For each one of these boxes, there are over 1,000 things that can effect if a borrower has reached the threshold to complete that box.  So.....talk to a great loan officer.  There are so many loan officers that don't know what they're doing.  But, conversely, there's a lot of great ones as well.  Your loan is so important!  Get a great lender so that you know, for sure, that the loan you want, can be closed on!

 

Posted by

Harrisburg PA Real Estate Expert

Ken Huebsch: Your premier real estate agent in the Greater Harrisburg area.  I am a specialist in Harrisburg real estate as well as the communities of Palmyra, Hershey, and Hummelstown.  My wife Leslye and I have a combined 40+ years' experience serving our clients -We KNOW Harrisburg. When you plan to buy or sell Harrisburg area real estate, allow us to work for you.  We are dedicated professionals and are here for your success. 

For more information on how we can best serve your real estate needs, please complete our online contact form or give us a call.  Also, check out what our fabulous clients have to say about us on our testimonials page!


Cell: (717) 514-1793            Email: Ken@KensHomesales.com


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Rainmaker
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Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Very nice explanation and data especially back end and front end formulas...thank you

Nov 19, 2011 10:00 AM #1
Rainmaker
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Al Raymondi
Ocean View Realty Group in Ormond By The Sea Florida - Ormond Beach, FL
Ormond By The Sea Florida - Home and Condo Sales a

Nice post highlighting the mortgage approval process Ken and Leslye, this is a really good explanation that buyers can use to get ready to buy their home.

Nov 19, 2011 10:18 AM #2
Rainmaker
72,065
Ken & Leslye Huebsch
First-Time Buyers, Residential Resales, New Construction - Harrisburg, PA
Realtors - Harrisburg Homes for Sale 717.514.1793

Richie, thanks. The goal is to make it easier for buyers to understand. I appreciate your comment.

Nov 19, 2011 02:18 PM #3
Rainmaker
72,065
Ken & Leslye Huebsch
First-Time Buyers, Residential Resales, New Construction - Harrisburg, PA
Realtors - Harrisburg Homes for Sale 717.514.1793

Al, thanks for the comments! Feel free to use this if you ever need it.

Nov 19, 2011 02:19 PM #4
Rainmaker
454,097
Joseph D. Federico
Donahue Real Estate Co. - Dedham, MA
Eastern Massachusetts Real Estate

Ken & Leslye-I hope that you have a wonderful Thanksgiving Holiday!

All the best from your friend in Massachusetts.

Nov 24, 2011 07:27 AM #5
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Rainmaker
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Ken & Leslye Huebsch

Realtors - Harrisburg Homes for Sale 717.514.1793
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