What are the requirements for lenders?

Tis The Season????

Not that season…..buyers season. I have seen more activity this week in the local market than I have in months. It’s almost a certainty as the calendar changes to the new year, we see a switch flip on and the market starts to churn. The last 12 entries of 2021 I focused this blog on sellers and the last few entries have been on the buyers side. Whatever side you are standing on, I hope these will help you work towards your goals in real estate. 

Lender Requirements Vary

Last week we talked about the first step of getting with a lender. Before you make that stop there are a few things you may want to determine to help speed up the process. A lender is going to ask you if you have any money set aside for a down payment. Some are going to suggest having 3%. 

Other consumer advocates like Dave Ramsey will want to see higher amounts like10-20%. The 20% amount helps you to avoid Private Mortgage Insurance (PMI). Avoiding PMI could end up saving you thousands over the length of the loan and is something you should consider. 

Amounts vary for different loan packages and there are even some loans that work for buyers with little or nothing down. While I think you should try to have some money to place down, every situation is different. The lender you choose should be working on your behalf to match you with the loan product that meets your needs. 

The Bills

Let’s talk about the Bills….not the NFL version….the ones that show up at your house each month. The lender is going to want to know what those recurring bills are. This helps them determine your debt to income ratio. This ratio is the amount of your current income compared to the amount of money you currently owe. The bank uses this amount to make sure that you have enough room in your budget to make your house payment each month. 

A good starting point for a conventional loan is going to be 45%. Other loan products and packages will allow for more. Your current FICO score will also impact the income to debt ratio. Of course, each lender is different and will want to have you at different levels based on their requirements. Ask your lender for specifics.

But I don’t know a good lender!

If you don’t have a lender in mind, the good news for you is I have several great lending specialist on my list of vendors. Any time we are talking about someone’s finances it’s a sensitive and personal matter. A lender is someone who you have to trust and feel comfortable with. The lender is a big part of our team that we have put together to make sure your deal keeps moving forward. Choose someone that will work hard to close the deal on time. 

Caution….Don’t buy too much home!

Keep your personal budget in mind and what you would feel comfortable doing. I personally have relied on the principles taught through Dave Ramsey at Ramsey Solutions for my own financial decisions. They have served me and my family very well over the years. They plan they advise buyers on is to stay at or below 25% of your take home pay for your home. This is a great budget starting point. 

On your mark…get set…..

Once you are done with the lending process we are ready to kick the house buying into high gear. It could take a little time to get the lender parts ironed out, but that time invested early is critical time saved once we find the right house. Never get the cart in front of the horse….it makes the total journey so much more difficult.

If you like these videos and post, I hope you can help them find a way to those that need them most. I’m standing by when its time to get moving!

Chris Whitehurst

Inner Banks Real Estate

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