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Finding the right loan officer can mean the difference between getting a loan and receiving the best loan and terms available or spinning your wheels. I work with the best loan officers in the business. Each gives our clients the personal attention and care they deserve. Before you find the home you want to buy, it’s important to find the right loan officer to help.

Would you like to have a loan specialist contact you?  Contact me and we’ll have a loan officer get in touch with you. No pressure, just good advice and information.

Want to know what you can Afford?

Most people need financing to buy a home.  Getting pre-qualified for a loan is a basic step in the home buying process.  To prepare for a conversation with a lender you can learn a bit about different kinds of loans and the loan approval process here.  Take a deep breath and read on!

Home Affordability is Not Cut And Dried

There’s a lot of very nice real estate in every town, but in terms of ownership, some of it may as well be on Mars. The problem is money and the eternal real estate question: how much house can I afford?

There are several ways of looking at affordability, but the most important ones are lender guidelines and your comfort zone.

DTI (Debt to Income) Ratios

Mortgage lenders look at two numbers — the “front-end” (sometimes called “top”) ratio, and the “back-end” (also called the “bottom”) ratio. The back-end ratio is also called the debt-to-income ratio, or DTI.

How are these ratios calculated? The first number we have to look at is gross monthly income, the money you get before taxes.
Lenders will need documentation to verify your income.  They will ask for–

  • 30 day’s pay stubs
  • 2 year’s W2s
  • 2 year’s tax returns if self-employed
  • An offer letter, if not yet started
  • Proof of education for new graduates

Most lenders require a two-year documentation to show a consistent earnings stream,. Maintenance, also termed alimony, can also be counted if documented in a divorce decree, along with the recurring method of payment such as automatic deposit. Seasonal income is also accepted, again with proof in a tax return.

You’ll need to consider your projected housing cost (lenders call this your PITI), including your principal, interest, property taxes, homeowners insurance, and things like HOA dues and flood insurance.

Front-End Ratio

Your front-end ratio is your housing costs divided by your gross income.  A conservative number to shoot for is having a mortgage that is 28% of your income.

Your projected housing costs are—payment on the principal, payment on on interest, payment on taxes, payment on insurance and HOA payment (home owners association).

Suppose you have a gross monthly income of $8,000. Let’s also say that your projected housing costs (PITI) are $2,000 a month. Your front-end ratio is $2,000 / $8,000, or 25 percent. PITI is principal (payment of the loan), interest (payment of interest on the loan), taxes and insurance. They will also include HOA fees and flood insurance in projected housing costs

Back-End Ratio

The back-end ratio includes your PITI plus payments for accounts like auto loans, student debt, and credit cards, divided by your income.  Most mortgages have a maximum back-end DTI ratio of 43%.

If these monthly costs amount to $1,200, then your back-end ratio is 40 percent. That’s $3,200 / $8,000.

LTV– Downpayment

Lenders talk about LTV.  Different programs require different LTV.

Loan to Value Ratio (LTV):  the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price).  Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.  Which mean you made a 20% downpayment.  Some programs are set up for 97 % LTV (3% down), 96.5 % LTV (3,5% down), 95% LTV (5% down), 90% LTV 10 % down and 80% (20% down).

DTI Ratios and Mortgage Programs

Different loan programs have different DTI (debt to income) ratio limits. Fannie Mae and Freddie Mac set theirs at 36/45. FHA puts its maximum at 31/43.

VA financing is different. With the VA, they only consider the back end, and that max is simply 41 percent.

Importantly, these ratios are not set in stone. For instance, Fannie Mae will go “up to 50 percent for certain loan case files with strong compensating factors.”

Compensating factors include such things as strong reserves, homeownership education, and income from a household member who is a non-borrower, perhaps a retired family member who lives with you.

Downpayment amount you have saved, Fico score, cash reserves, money saved for closing costs and which loan program you qualify for all effect your monthly payment and closing cost payment.  All that said you need to consult with a lender.

Mortgage Programs

The big 3 are Conventional Loans, FHA Loans, and VA Loans.  Each of these have various programs with different eligibility requirements and rates and closing costs.

There are also downpayment assistance programs like Home in 5, Home plus, Home path, USDA loans, programs for first responders, neighborhood stabilization programs, Reverse mortgages…the list goes on.

There are programs offered by–

  • State Housing Finance Agencies (HFA) often offer the broadest array of opportunities.
  • Cities and Counties offer programs with criteria adjusted for local median income and home prices.
  • Housing Authorities
  • Non-profits
  • Employers


Downpayment amount you have saved, Fico score, cash reserves, money saved for closing costs and which loan program you qualify for all effect your monthly payment and closing cost payment.  All that said you need to consult with a lender.

I have provided overview information for your use on Conventional, FHA and VA loans..  Please review and learn the basics then talk with a lender.