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Four C's for qualifying for a mortgage
- Capacity
- Credit
- Character
- Collateral
- Capital
- Compensatory Factors
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Capacity
- Do you generate enough cash to qualify for a loan?
- front ratio and back ratio
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Front ratio
is the maximum amount each month that you can use to pay mortgage expenses. Ratio used on mainland is 28% of gross salaryPITI- (Mortgage and debt services- Principal, Interest), Property taxes, insurance
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Back Ratio
Back Ratio- Maximum amount you can use to service all loan costs including consumer debt 36 to 41%. Includes all consumer debt. Car payments etc. Other long-term installment type debt
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Character
Based on the personal judgement call of the loan officerIf you are applying, dress well
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Collateral
- the value of your property
- Going to be judged on either the contract price or the appraisal whichever is lower.
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Capital
how much money you have in your savings, stock, portfolio etc. Lenders will lend more money to rich people more than poor people
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Compensating Factors
graduated from college, military
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Conventional Loan
require insurance if your loan-value ratio is greater than 80%. If you put 80% down, you don’t have to pay insurance. Generally, you want to put at least 20% down to avoid insurance.
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FHA
requires insurance. Have to pay a premium for insurance
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VA
To get a VA loan, you must be a veteran and have a certificate of eligibility. Can get up to 100% of purchase price.
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