Your One Stop Resource for Saving Money.
Delinquent Utility and Applying for a Mortgage - The Bills.com Blog
Bills.com Blog > Mortgage Questions > Delinquent Utility and Applying for a Mortgage
Delinquent Utility and Applying for a Mortgage
Thursday, Aug 20, 2009
Question: About a year and half ago I found out I had a utility collection on my credit report. I paid it as soon as I found out about it. Me and my husband want to purchase a home in the next year and I am worried that the "paid collection" will hurt us. My FICO score is 673. I have disputed the information because nobody had contacted me about this and it was sent to the wrong address. Do you think I will be able to get another home mortgage with my husband?
Before you buy a home, it is crucial that you weigh how you can afford to pay for it. You don’t want to waste time or money by bidding on a house that you cannot afford or by applying for a loan that is beyond your means to pay month after month and year after year. Figuring out your budget for your home will make it easier to get the right loan and also to know what changes you may need to make to your finances and to you credit profile. (Credit Profile vs. Credit Score)
As a standard rule you are advised to buy a house worth no more than 3 times your gross household income. Use this figure if you have some other debts, such as student loans, car payments,
or sizable credit card balances. If you have no other debts, you likely can afford a house that costs as much as five times your annual household income.
When potential lenders review your ability to qualify you for a home loan, they are going to pay close attention to your debt-to-income ratio (DTI). To determine your DTI, start by computing your total net monthly income. This includes your monthly wages and any overtime, commissions or bonuses that are guaranteed; plus any pension monies or monies that come from alimony or child support, if applicable. If your income varies month-to-month, calculate your monthly average over the past two years. Don’t forget to include any other monies earned, whether from rentals or any other additional income.
To determine your monthly debt obligations, make sure to include all of your credit card bills, any loans, such as automobile, student, or personal and the amount of the new mortgage payment in the loan that you will apply for. Make sure to include your monthly rent payments if you rent. When you are adding up your credit card obligations, use the minimum required monthly payment. Divide your total monthly debt obligations by your total monthly income. This is your total debt-to-income ratio. The lower your DTI, the better. A high DTI can prevent you from getting the loan. It also can be a warning sign that even a loan that you qualify for could be a serious burden to make each month.
Most
When potential lenders review your ability to qualify you for a home loan, they are going to pay close attention to your debt-to-income ratio (DTI). To determine your DTI, start by computing your total net monthly income. This includes your monthly wages and any overtime, commissions or bonuses that are guaranteed; plus any pension monies or monies that come from alimony or child support, if applicable. If your income varies month-to-month, calculate your monthly average over the past two years. Don’t forget to include any other monies earned, whether from rentals or any other additional income.
To determine your monthly debt obligations, make sure to include all of your credit card bills, any loans, such as automobile, student, or personal and the amount of the new mortgage payment in the loan that you will apply for. Make sure to include your monthly rent payments if you rent. When you are adding up your credit card obligations, use the minimum required monthly payment. Divide your total monthly debt obligations by your total monthly income. This is your total debt-to-income ratio. The lower your DTI, the better. A high DTI can prevent you from getting the loan. It also can be a warning sign that even a loan that you qualify for could be a serious burden to make each month.
Most
lenders traditionally will qualify you for the loan with a DTI of 28% to 44% of your monthly income. In other words, if your monthly income is $4,000, the lender would ordinarily want you to pay no more than $1,760 (.44 x $4,000) toward all your debts. Some sub-prime lenders will allow borrowers to have DTI ratios as high as 55%.
You may have compensating factors that will allow you to qualify for the loan, even with a less than desirable DTI. For instance, if you have an excellent credit record, a lender might allow you to go more deeply into debt. Just how high a DTI you can have and still qualify for the loan will depend on such factors as the amount of your down payment, the interest rate on your new mortgage, your credit history and score, and how much other debt you are carrying. Bills.com has mortgage calculators that will help you quickly determine monthly payments on different size mortgages so you can learn how much house you can afford. All calculators are not created equal -- but all of them are free. You should investigate different scenarios, so you can see how the amount of down payment, the length of the loan term, and the interest rates will affect the size of the monthly payment.
Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan form page and find a loan that meets your needs.
I hope the information provided, helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
You may have compensating factors that will allow you to qualify for the loan, even with a less than desirable DTI. For instance, if you have an excellent credit record, a lender might allow you to go more deeply into debt. Just how high a DTI you can have and still qualify for the loan will depend on such factors as the amount of your down payment, the interest rate on your new mortgage, your credit history and score, and how much other debt you are carrying. Bills.com has mortgage calculators that will help you quickly determine monthly payments on different size mortgages so you can learn how much house you can afford. All calculators are not created equal -- but all of them are free. You should investigate different scenarios, so you can see how the amount of down payment, the length of the loan term, and the interest rates will affect the size of the monthly payment.
Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan form page and find a loan that meets your needs.
I hope the information provided, helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
Submit questions/comments about this post:
Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
Information provided by Bills.com is for general informational purposes only and is not be
construed as legal, financial, bankruptcy, tax or other professional advice. Should you
require more detailed information or specific professional advice tailored to your situation you
should consult an attorney, financial planner or tax advisor.
While we believe all information provided by Bills.com to be accurate as of the date of its posting, we cannot ensure its accuracy. Use of this site and any information contained on or provided through this site is provided without any representations, warranties or guarantees. Bills.com is not responsible or liable for any decisions or actions anyone may take based on the information provided. Please see Terms of Use.
While we believe all information provided by Bills.com to be accurate as of the date of its posting, we cannot ensure its accuracy. Use of this site and any information contained on or provided through this site is provided without any representations, warranties or guarantees. Bills.com is not responsible or liable for any decisions or actions anyone may take based on the information provided. Please see Terms of Use.
© 2006 - 2009Bills.com LLC. All Rights Reserved.