It is important to get pre-approved before you start visiting open houses. The first step is to discuss the loan process and your needs with a loan officer. Your loan officer will guide you to complete an application an you will be asked to provide appropriate documentation. Your pre-approval application will go through a thorough process to determine your credit score and to determine how much you can afford with the goal of getting you pre-approved for the loan. This will let you share with your agent not only what you are looking for in a home, but your price range.
DTI: Debt-to-Income ratio is the percentage of a borrower’s income that is devoted to debt.
LTV: Loan-to-Value is a number we use to determine how much risk a borrower is assuming with a loan.
What is a good DTI ratio?
Anything at or below 36% DTI is considered ideal, anything higher leaves room for improvement and could impede the loan process.
REMINDER: Your monthly mortgage payment should not exceed 28% of your gross monthly income
What is a good LTV?
LTV ratio of 80% or less. LTV ratios greater than 80% typically require Private Mortgage Insurance (PMI), which can add quite a lot to your payments over the life of the mortgage. Lenders consider a few things when factoring how much you can afford for a home.
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