While there are expectations that mortgage requirements will relax some and approval rates will start crawling back up, you may not yet want to bet on that. We are still shaking off the last recession, which left some of the larger financial institutions in ruins. Instead of banking on relaxed requirements, you should carefully consider the current requirements and make a plan to meet them – this way, you will be in a great position for a mortgage in Atlanta, even if standards relax!
- Down payments. Last year, the median down payment for all homebuyers was 9 percent, but it was only 4 percent for first-time buyers, most of whom used FHA financing. The more you can put down, the better, as it will significantly increase your chances of getting approved and getting a nice, low rate.
- FICO score. The median FICO score for all mortgages closed in February was 745. By comparison, about 60 percent of all mortgages approved before 2004 had FICO scores of 740 or lower. Get your free annual credit check and start taking steps to increase your score if it is under this number.
- Loan to value ratio (LTV). The LTV is a way for a lender to determine how much of the value of your home they are on the hook for in the event you default. The lower this value is, the more likely you are to be approved.
- Debt to income ratio (DTI). The DTI is a measure of how much the borrower makes, and judges their ability to repay the debt. It is determined by adding together all documented income sources to compute income, and then it is compared against debt. Debt is expressed two ways: all outstanding debt, including consumer debt and alimony, and all debt plus the debt to be incurred by the mortgage for which the buyer is applying. Again, this is a value that you want to be lower, which means you have more income to cover the debt.
Knowing these four key numbers and being able to maximize your ability to deal with each of them will increase your chances of getting a mortgage at the best rate for you. Contact either of our Atlanta offices to explore your options and better understand what position you are in to get the loan you need.