Looking for your dream home can feel like a full-time job. When you also have to search for the perfect financing, the whole process can feel overwhelming. Unless you’re part of the 32% of people who buy their homes in cash, you’ve likely wondered, “Will I get a mortgage?” while perusing listings in your area. The experts at Brass Financial Group are here to walk you through the typical requirements to get a traditional mortgage.

Down Payments Preferred

If you’re looking for a traditional mortgage, an 80/20 loan-to-value (LTV) is preferred by many lenders. This means that saving for a 20% down payment is ideal. With the median home price in New Jersey being $299,000, you’d need to save nearly $60,000!

Your Credit Scores Counts

Traditional lenders will also be interested in your credit score. The best rates will be given to those who have a credit score of 740 or higher. Right now, the average credit score is 695, which is an all-time high. If your credit score is on the low side, typically less than 620, it’s unlikely that you’ll qualify for a traditional mortgage.

Your Income Comes into Play

Banks have complex formulas to determine if your income is sufficient for a traditional mortgage. There are two types of ratios they are most concerned with, front-end ratios and back-end ratios:

Front-end Ratio

A front-end ratio is also known as a housing expense ratio and it allows the bank to determine how much house you can afford. It takes into account your mortgage, real estate tax, private mortgage insurance (PMI), and homeowner’s insurance. 28% of your income is typically the most that a lender will allow.

Back-end Ratio

A back-end ratio is also known as a debt-to-income ratio. For this ratio, the bank will total all of your debts, including:

  • Your potential mortgage payment
  • Student loan
  • Credit card debt
  • Medical bills
  • Child support
  • Alimony
  • Car Loans

To determine your back-end ratio, Mortgage Calculator explains that you need to multiply your annual income by 0.36 percent, then divide the total by 12 months. Subtract your monthly debt payments to find out how much you can afford for your monthly mortgage.

Will I Get a Mortgage?

If you’re still wondering, “Will I get a mortgage?” or if reading all of these requirements has you worried that you may not qualify, Brass Financial Group can help. Our financing isn’t based on your credit score, income, or employment status. If you have financing questions, contact us or give us a call at 609-800-FUND. One of our experienced loan officers can walk you through the process.

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