Most notably, mortgage interest rates are rising. As of September 27, the average interest rate on a new, 30-year fixed-rate mortgage was 4.72%. About a year ago, the average rate on this mortgage was 3.83%. While the difference is slightly less than 1%, it has an impact.

For example, a $300,000 mortgage at 3.83% would give you a principal and interest payment of $1,403 a month. If you made this monthly payment each year for the full 30-year loan term, you’d repay a total of $505,080. ($300,000 to principal, with total interest paid of $205,080.)

Borrowing $300,000 with a rate of 4.72% gives you a principal and interest payment of $1,560 a month. The higher interest rate costs you $157 more per month! Over the life of the mortgage, your total repayment would be $561,428, meaning you’d pay $56,348 more in interest.

On another front, higher mortgage rates mean that debt-to-income ratios can be harder to meet. During the mortgage underwriting process, your gross monthly income is compared to all of your monthly debt payments – student loans, credit cards, car payments, ect. This is known as “front-end” DTI. Next, the lender adds your projected mortgage payment into the mix, for the “back-end” DTI.

In the most generous underwriting criteria, your back-end DTI cannot exceed 50% of your gross monthly income. Naturally, the higher the mortgage interest rate, the higher your DTI will be.

But when interest rates are rising, a variety of consumer debts also see higher rates and higher monthly payments. If you are carrying any credit card balances, student loan debts or other loans with variable-rate interest, you’re likely to be paying more for them. When these monthly payments rise, it affects your DTI – not to mention your wallet!

If you’re unsure of the rate and terms on your current debts, now is the time to examine them and create strategies for paying them down. Reducing your variable-rate consumer debt will save you money, and put you in better shape for mortgage approval!

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA-M, CNE, CSP, PSA, e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services, www.buyershome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

The post Columbus Home Buyers Should Prepare for Higher Interest Rates appeared first on Columbus Ohio Real Estate | Buyer's Resource Realty Services.

The exact criteria for mortgage loan approval will vary depending on the lender and type of mortgage. However, there are some common factors most lenders look for:

1. Consistent work history. This includes the length of time at your current employer, as well as your time in a specific industry. Usually two years is a sought after work history, but extenuating circumstances may mitigate this – and school or college may actually count towards your work history!

2. Good financial records. Prepare a file with copies of your recent two years income tax returns, last three months of bank statements, and retirement account statements. Have documentation ready to support any large or unusual cash deposits.

3. Good savings habits. This includes automatic deposits to a savings account, regular 401 contributions, and so on. Your deposit amounts do not have to be large, but they are looked upon favorably if they are made consistently.

4. Clean credit history. Ideally, no late payments in the past 12 months, and no outstanding collections. Credit score requirements vary; FHA mortgages allow FICO scores in the 600’s, while most conventional mortgages prefer scores over 700. See our blog post on credit facts for ways to monitor and improve your credit!

5. Minimal debt. Your debt-to-income ratio is closely examined in order to determine affordability. Car payments, credit card debt and student loans impact this ratio. However, any debt that is within eight or nine months of being paid off will usually not be counted against you.

6. Down payment. While FHA mortgages allow as little as 3.5% down, remember that you will be required to pay mortgage insurance for the life of the loan. A conventional mortgage requires at least 5% down. Also, mortgage insurance is still required if you have less than 20% down – but with a conventional loan, you will have a future opportunity to waive it and save more money each month. See our blog post about down payments and mortgage insurance for details!

Your Complete Home Buying Resource 

Before you speak to a lender, contact us! We will refer you to trustworthy mortgage lenders who will find the best mortgage loan for your needs. Remember – lenders can only treat you as a “customer” but we are your “fiduciary” (meaning a person legally trusted to work in your best interests.)

We also encourage you to download our FREE e-book  for expert home buying tips and strategies!

As your Exclusive Buyer’s Broker, we serve your best interests at all times. Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times. Understanding this distinction could literally save you thousands of dollars not only on on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner. 

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

The post Mortgage Qualifying Tips for Columbus Home Buyers! appeared first on Columbus Ohio Real Estate | Buyer's Resource Realty Services.