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There are many factors that will affect a lender's decision on your loan application. The most important requirement that a lender considers is your ability to repay. Basically, the lender is looking for your Debt to Income (DTI) ratio at 45% or below. Your loan can still be approved even your DTI is at 50% or 60%, however, you will need to have some compensating factors. The following is a tool that will help you to make an initial determination if you can qualify for a loan of a specific amount. Please note that this is just a rough tool and you will need to call a qualified mortgage professional for a comprehensive evaluation of your personal situation.

Self-Qualification Tool
Your Income (Salaries, 1099, etc) /month*
Your Other Income (Alimony etc) /month
Your Monthly Credit Card and Other Debt Payments /month*
Approximate Home Value /month*
Your Yearly Property Tax /year
Your Hazard Insurance or Condo Maintenance Fee /month
Loan Amount *
Interest Rate *
Terms *

Compensating Factors

When a mortgage loan application is evaluated by an Automatic Desktop Underwriting (DU) program against a set of stringent requirements. Sometimes, the DU program will allow the strengh of one requirement to compensate for the lacking of the other to issue an approval for an application that otherwise would have been resulted in a rejection. Credit scores, borrowing less again a property (typically called Loan to Value LTV ratio), and large deposit in the bank are three major compensating factors mostly seen.

High Credit Scores

The computerized underwriting system will take into consideration if you have high credit scores, typically 740 or above, with good credit history (no bankruptcy, collections, late payments, etc).

Large Savings In The Bank

If you have large amount of savings in your bank accounts, it will help to compensate your high DTI ratio. This money must be yours and must be deposited in your bank accounts for some time (at least two months).

Borrowing Less Against The Property

If you borrow less against the property, it posts lesser risk to the lender, therefore it will affect the decision in your favor as well.

Again, the computer underwriting system uses a complex algorithm to calculate the risk factors to the lenders and renders a preliminary decision on your loan application. Until we run your scenario on the system, we really don't know how your compensating factors will affect the loan decision one way or the other. The best approach is to submit your pre-qualification to us and we will run your personal scenario through the system and evaluate your qualification against other guidelines from lenders, after that, we will be able to give you an accurate answer.

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