Hi guys and hello world! Since I recently changed companies, I figured it was about time to start my own website and blog where I can have better communication with my clients and the public. It’s also going to provide me with an avenue to get better and more content out to you guys about stuff that matters. My blog is going to be about how to help you buy that house you’ve been wanting, how to refinance and pull the cash out of your home, and more.
The Mortgage market has changed a lot over the past few years and rates have risen from around 2.87 where they where in August of 2021 to today’s rates of the high 6’s.
Keep in mind each bank is different and here are some things banks look at when considering your purchasing power and if you can qualify:
- Financial Condition: Banks analyze the financial health of the entity or individual making the purchase. This includes assessing their creditworthiness, current financial obligations, and their ability to make timely payments.
- Collateral: Banks often require collateral to secure the purchase, such as property or valuable assets. They will evaluate the value and condition of the collateral to ensure it is sufficient to cover the purchase and mitigate risks.
- Loan-to-Value Ratio: Banks calculate the loan-to-value (LTV) ratio, which compares the loan amount to the appraised value of the item being purchased. A lower LTV ratio indicates a lower risk for the bank and may lead to more favorable loan terms.
- Purpose of Purchase: Banks also consider the purpose of the purchase. They may evaluate whether it aligns with their lending policies and guidelines. For example, a bank may be less willing to finance a high-risk investment compared to a more stable business expansion.
- Repayment Ability: Banks assess the borrower’s ability to repay the loan. They evaluate the borrower’s income, cash flow, and the stability of their income source. A well-established and consistent income stream increases the borrower’s chances of securing the loan.
- Employment History: Banks often examine the borrower’s employment history, looking for stability and a consistent income source. A solid work history with a steady income can positively influence the decision-making process.
- Credit History: Banks typically review the borrower’s credit history to evaluate their past repayment behavior. A good credit score demonstrates responsible financial habits, while a poor credit history may make it more challenging to secure a loan or affect the interest rate and terms offered.
- Debt-to-Income Ratio: Banks consider the borrower’s debt-to-income (DTI) ratio, which compares their monthly debt obligations to their income. A lower DTI ratio suggests the borrower has more disposable income available for loan repayments, making them a more attractive candidate for financing.
- Business Plan (for Business Purchases): If the purchase is for a business, banks review the business plan to assess its viability, growth potential, and revenue generating capabilities. They evaluate the industry, market conditions, and competition.
- Legal Requirements: Banks ensure that any purchase complies with legal requirements, such as necessary licenses, permits, or certifications. They may also assess any legal risks associated with the purchase.
You can see there is a lot to consider. You can try to sort this all yourself or you can cut through the BS and contact me today for help and I’ll walk you through it.
Cheers! Ron, Cali Mortgage Guy
