A lot of times it’s easy to spot weeds in your yard. Some have imposing jagged-edged leaves, or furry foliage. Others have thorny stems. Many times they stand out simply because they tower
What Is a Mortgage Preapproval Letter?
Dated: January 7 2021
In a nutshell, a mortgage preapproval letter from a lender says you’re likely to qualify for a mortgage loan based on the financial information you submitted. The letter details how much money you could be approved for.
It’s important to understand that a preapproval isn’t the same as a mortgage approval—a preapproval isn’t a guarantee of funding. A preapproval letter is intended to give you a budget to work with during the process of looking for and buying a home. It also lets sellers know that you’re a good candidate to receive financing.
The preapproval process can vary from lender to lender. Some will only ask for basic info like your name, annual income, and credit score. Others may request documentation of your finances, and perform a credit check.
Reasons Why Lenders May Deny Preapprovals
Mortgage lenders may approve or deny your application depending on how much of a risk they consider you to be. In a recent study by the Consumer Financial Protection Bureau (CFPB) of 2019 mortgage-application denials, high debt-to-income (DTI) ratios were the reason behind about a third of mortgage applications being denied. Another main factor was poor credit history.
A little more about DTI ratios. A debt-to-income ratio is the amount of your monthly income that’s used for paying debt. A front-end debt-to-income ratio is calculated by your estimated costs for housing divided by your gross income. A back-end debt-to-income ratio is the percentage of your income that’s used for paying housing costs, student loans, credit cards, car loans, child support, and revolving debt on your credit report. Typically, mortgage lenders like to see a back-end DTI ratio of 36 percent or less, although the FHA will accept a DTI ratio of up to 50 percent.
To learn more about DTI ratios, and to determine yours, visit sites like Bankrate.com and NerdWallet.com, which offer comprehensive explanations of debt-to-income ratios and have DTI ratio calculators you can use.
Are You Buying or Selling a Home in Vero Beach?
If you're considering buying or selling a home in Vero Beach, we're here to help. Check out our:
You can also get in touch with us to learn how we can aggressively market your home to all the right buyers. We can help you sell it quickly - and at the right price - so call us today.
Chip is the IT Manager for Alex MacWilliam Real Estate. He handles the technology needs of the company as well as helping agents in their day to day problem solving.....
Latest Blog Posts
Weeds tend to stand out. Sometimes they have off-putting hairy leaves. Sometimes they have thorns. Sometimes they have both. Most times, though, they’re just plain ugly. But sometimes weeds
You receive more mail for the previous owners of your new dream home than you do for yourself. As you settle into your new residence there are a million things you have to take care of and it would