CASH AVAILABLE FOR A DOWN PAYMENT

How much cash do you have available for a down payment, and/or what assets do you have available that can be liquidated (converted to cash)?

A down payment is the money paid to make up the difference between the purchase price and mortgage amount. In today’s market, expect to put down a minimum of 15% – but ideally 20% – of the sales price.

ASSETS

Besides showing proof that you have the means to make a down payment, a bank will also look at your assets in conjunction with your income to help determine your worth and ability to make your monthly payments.

Assets include but are not limited to: cash in the bank, other bank and brokerage accounts, retirement accounts, and all money in reserve.

INCOME

Be prepared to submit your Federal Tax Returns from the past two years.  If your 2008 returns are not yet completed, your ’06 & ’07 returns are currently acceptable as long as you have proof of your 2008 and current income.

a)    If you are a salaried employee, banks look at your current base salary.

b)    If you are a freelancer or have a bonus-based salary, banks will average your Adjusted Gross Income (net income after write offs) reported on your tax returns for the past two years.

c)    If you own your own business, you will also need to provide the 2008 profit & loss statement for the company.

DEBT

In order to qualify for a mortgage, a bank will also analyzes your DTI (debt to income ratio).   No more than 45% of your income can be going towards debt payments.

Debts include but are not limited to: amount of monthly minimum credit payments, student loans, other mortgages, car loans, maintenance or common charges.

CREDIT REPORT

Your credit rating is based on having at least a two-year credit history and three lines of credit.  You also must score a credit rating of at least 720 out of 850 in order to qualify for a mortgage. Your credit score is evaluated based on:

–Bill payment history  (do you pay your bills on time?)
–History of all loans and payments
–Credit card history & payments
–Balance vs. credit limit.  (This means what is the credit limit on all of your cards and other lines of credit compared to how much you have borrowed.  Basically, have you maxed out your credit cards?)

Even if you don’t live in the Tri-State area, Manhattan Mortgage Company’s website is a fantastic resource available to help familiarize you with key industry terms, real estate news and mortgage calculators.   But remember, mortgage brokers are licensed by State, so it is important to find a certified loan officer in your own neck of the woods. And remember, taking out a mortgage is a giant responsibility.  If you default on your loan payments, you could lose your home.  So, educate yourself, ask questions, and with a lot of hard work and a little bit of luck, you too can realize your dream of owning your own home! 

**Originally from Seattle, Aaron comes from a family of real estate professionals. Having lived and breathed “real estate” his whole life, he gained an extensive and in-depth knowledge of the overall business, a background that serves him well as a financing professional at Manhattan Mortgage. While Aaron has spent the past several years focusing on the Brooklyn and Manhattan markets, he has also established a solid client base in the rest of the tri-state area.  You can reach Aaron directly at 718-596-6425 orAAngel@manhattanmortgage.com.

*Fabulous & Frugal offers information we hope will be of interest to you, but we are not financial professionals. Always consult with financial professionals who are familiar with your personal financial situation before making any investment or other financial decision. For additional information, please read our Terms of Use agreement and Privacy Policy.

| Print

Pages: 1 2