Premiere Mortgage Services Inc. - Dana Bain

Signs You May Not Be Ready For A Mortgage Yet!!

January 24th, 2014 4:26 PM by Robin Bain

Don't get a mortgage

Most of our articles are addressed to those who are ready to or want to get a mortgage.  Up until 2014, you might have even thought that you and your spouse were ready to get a mortgage.  However, due to the newly implemented mortgage rules, the ideal borrower profile has become even more specific. 

Here are some reasons why you’re not ready to pursue a mortgage:

You’re not sure how long you will stay.

If you don’t know how long you will stay in the house, you’re not ready for a mortgage.  This is due to the fact that you will likely lose money if you stay in the house for less than five years.  Mortgages have extra costs that aren’t well-known to the public such as closing costs, which can easily be anywhere from two to five percent of the total loan amount.  This is money that you won’t get back, so you shouldn’t pursue a loan unless this is a loss you can afford to take.

You only have money saved up for a down payment.

If you only have enough money saved up for a down payment, whether that’s 3.5% of the loan amount or 20% of the loan amount, you’re not ready to get a mortgage.  There are many additional costs that are associated with buying a house such as closing costs, moving expenses and the home inspection.  Additionally, some lenders want to see a two or three month cash reserve to ensure that you can still make mortgage payments in case of an emergency.

You have a hard time paying rent every month.

If you have a hard time paying rent every month, you’re not in a good place to take on a mortgage.  Mortgages are much more unforgiveable in terms of damaging your credit score and having long-lasting repercussions.  If there’s a specific reason why you’re having a hard time paying rent every month such as low income, medical bills or that you’re self-employed, you’re going to have a hard time getting lenders to take a second look at you.  If you’re in this situation, you need to take a few months to make sure that you can show reasonable proof of paying your rent on time.  Once you have this paper proof, lenders will have a much easier time giving you the loan you need.

Reasons to not get a mortgage

Now, in 2014, there are more rules that make you no longer eligible to get a mortgage.  As part of the new Qualified Mortgage rules, lenders are no longer giving out loans to borrowers who can repay the full amount in the allotted time.  Here are the new rules that make you ineligible to get a mortgage in 2014:

Your debt-to-income ratio exceeds 43%.

If your debt-to-income ratio exceeds 43%, you won’t be eligible for a mortgage.  This means that your student loans, car loans, business loans are too high for lenders to assume that you will be able to make your monthly mortgage payments each month.

You have a credit score below 620.

If your credit score is below 620, you’re not ready for a mortgage.  Most lenders will turn you away in a heartbeat and will tell you to work on your score before coming back.  If your credit score is lower than 620, you are showing your lender that you have a history of not being able to make reasonable payments on time and struggle with money management.

You have less than two years of income proof.

If you have less than two years of income proof, don’t expect to get a mortgage anytime soon.  You are considered a “risk” in the eyes of lenders if you don’t have proof of a regular income for the past two years because you might not be able to make your mortgage payments each month.  This especially affects entrepreneurs, who usually see ebbs and flows in income each month.

Dana Bain

How To Contact Us

By Phone:978-422-2311 (Office)
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By Fax:978-422-2313 (Fax)
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Sterling, MA  01564-2829

Searching for a mortgage loan? We can help! Give us a call today at 978-422-2311. Want to get started? Apply Now.

 Massachusetts License Number Broker MB1498 Licensed by the State of New Hampshire Banking Department- License Number 5430-MBR Premiere Mortgage Services Inc. NMLS #1498 is a licensed broker and not a lender. We arrange  but  do not make loans. Dana Bain NMLS #18693 Robin Dunbar Bain NMLS #18699  

Posted in:General
Posted by Robin Bain on January 24th, 2014 4:26 PM


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