Rule of Thumb

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The most typical question a mortgage broker is asked is “How much am I qualified for?”. This question is becoming increasingly difficult to answer without an in depth look at your financial picture.
The government stress test and increasing interest rates often means your limits today are different tomorrow.

Since this question is asked so often, I have decided to give a very general rule of thumb… It should be taken as a generalization and not a hardfast rule.

If you are debt free and have a well established credit history, for every $25,000.00 in family income we can qualify you for $100,000.00 mortgage. As an example, if you want to buy a house for $300,000.00 then you will need $75,000.00.

Some factors that can affect this generalization:

• Debts: If you have lots of car loans, high line of credit/credit card utilization
• High Property Taxes
• Weak/Poor Credit: If your beacon score is less than 680, you will qualify for reduced lending ratios

Keep in mind that we are different then chartered banks. As a mortgage broker we have access to various banks, credit unions, virtual lenders, and alternative options. Each lender has different rules for qualification. Some lenders accept child tax as a portion of the income. 20% down payment or more helps too because certain banks offer extended amortizations (30 Years). In addition, because we don’t require high ratio default insurance with 20%, the banks can make their own decisions regarding affordability ratios.

Self employed clients, keep in mind we are talking about NET income after all deductions. If your gross income is $200,000.00 per year but you write off lots of expenses and end up with an income of $20,000.00, this income (20K) is the number that we are using to qualify. Fear not, we have programs and options for you too.

The most general rule of thumb that I can offer… Don’t guess. Give us a call because it’s free. With all the rules, policies, and programs that exist today let our team of professionals guide you through the process.