# WYNTK

## What you need to know before meeting with a loan officer

To purchase a home with or without down-payment involves three basic factors and they are:

Good or enough income

Good or reasonably fair credit,

Enough money in the saving account to cover down-payment (if any), closing cost (3-6% of the loan amount), and Reserves (3-6 months of mortgage payments).

It would be the duty of a loan officer to show if you qualify for a loan or not and by reading our material you will have an idea what will happen at the meeting.

## HOW MUCH DO YOU QUALIFY FOR (RULE OF THUMB)

Let’s look at a typical loan transaction and the calculation is done in reverse

1 Assume that loan amount is \$300,000.00

2 Interest rate is 5% fixed

3 Term of the loan is 30 years

4 Monthly payment (principal and interest) would be \$1,610.46

5 Add tax, insurance and mortgage insurance to P&I and make the full payment \$2,000.00

6 Divide \$2000 by 0.28, result is  \$7,142.28. the figure \$7142.28 is the monthly income of the borrower in this example. His/her annual income is
\$7142.28 x12\$85,714.28

7 Divide \$300,000 by \$85714.28 (300000/85,714.28=3.5)

Let’s see what we have learned from above calculations:If a borrower has an annual income of \$85,000 or higher, he/she can borrow 3.5 times his/her annual income, will have a monthly payment of about \$2,000.00.
Let’s divide 2000(monthly payment)/300000(loan amount) 0.0066 (payment factor for above example)
The figure (.0066) can be used to estimate a monthly payment for any loan amount (example: \$200,000 x.0066= \$1320…this is a payment for a loan of \$200,000). His or her monthly income is 1320/0.28 \$4715.00

8 Summary:
8.a You can borrower up to 3-5 times your annual income, depending on the rate.
8.b The Housing Payment divided by Monthly Income, cannot exceed 28%
8.c The Housing Payment plus other monthly payments divided by the Monthly Income cannot exceed 36%

Let’s look at a typical loan transaction and the calculation is done in reverse

For self-employed borrowers different set of rules are used for loan qualification.
Self-employed borrowers need to have:

• 10% minimum down-payment
• Have good credit
• May be asked to show tax returns and/or bank statements as proof of employment and not the income.

For income, a DOLLAR figure will be written on the application by loan officer to show borrower qualifies for the loan and meets the qualifying ratios. Example: If self-employed borrower shows high revenue and large deductions, and little taxable income, the loan officer will write the right income figure on the loan application on behalf of the borrower, and that’s how the programs work. It is called STATED INCOME LOAN. The calculation of qualification is same as above.

What you need to know before meeting with a loan officer…

Purchasing a home with or without down-payment involves three basic factors and they are: 1) Good or enough income 2) Good or reasonably fair credit, 3) Enough money in the saving account to cover down-payment (if any), closing cost (3-6% of the loan amount), and Reserves (3-6 months of mortgage payments).

It would be the duty of a loan officer to determine if you qualify for a loan or not and by reading our material you will have an idea what will happen at the meeting.

Our lending partners have great loan programs to assist most borrowers with non-traditional conditions.

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