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Mortgage PaperworkWhen applying for a new mortgage or a refinance, there are a few factors that go into how much you will pay every month. The ones that determine your mortgage rate are Credit Score, Debt-To-Income, Loan Program, and Loan Size. What do these mean? Let’s go into detail, so that you know what you’re looking at.

Credit Score is literally a number assigned to you that demonstrates how capable you are of paying back money that is loaned to you. It has several factors that go into it. A credit score primarily comes from credit reports from one of these three major credit bureaus: Experian, TransUnion, and Equifax. Income is not considered by the major credit bureaus when calculating a credit score. It is calculated using a formula that takes into account missed payments, unpaid debts, judgements against you, debt-to-income ratio, and basically everything that you do involving money. The most commonly used score is FICO, and it ranges from 300-850. Higher is better. You should check this out before applying so that you know

Debt-To-Income Ratio is just that – a ratio that shows how much of a consumer’s gross income goes into paying down debts. There are more complications that go into it, but just know that the less debt you have, and the more income you bring in, the better off you are here. Before applying for a mortgage, try to have this as low as possible, by paying off credit cards and other loans as quickly as possible. This is a major plus on your application.

Loan Program is what type of loan you are getting. There are a lot of loan programs out there for home buyers, including conventional, FHA, HARP, VA, USDA, Jumbo, Cash Out Refinance, and many more. The Home Loan Expert always has a loan program for every home.

Loan Size is, of course, how much money you want to borrow. Different loan programs require different amounts of down payment that limit the amount that can be borrowed. The down payment percentages are: Conventional is 5%, FHA is 3.5%, VA is 0%. Otherwise, we can craft a loan for almost any home you want to buy as long as you meet the other criteria.