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any other debts such as credit cards or car payments. Sometimes this ratio is referred to as the front-end ratio.
When other monthly debt is taken into consideration, a ratio of thirty six to forty per cent is acceptable. This is called the back end ratio.
The calculations are as follows: the front-end ratio is determined by dividing the PITI by the gross monthly income. The back end ratio is determined by dividing the PITI combined with the debt, by the gross monthly income.
Four things are needed in order to determine the PITI. The sales price, the mortgage amount, annual taxes, and annual hazard insurance. From the sales price you must subtract the down payment in order to determine how much is needed from your bank.
The mortgage amount is generally the sales price minus the down payment.
To determine the principle and interest portion of the payment you must use a mortgage payment calculator and input the loan amount, the interest rate, and the term of the loan in years. Mortgage calculator websites are available and can be found without much difficulty.
Annual taxes are divided by twelve in order to determine the monthly property tax payment. The annual hazard insurance must be divided by twelve in order to come up with the monthly property insurance payment.
All of these terms and figures seem daunting, but once put into practice, things become easier and more self-explanatory. This is the most complex portion of pre-qualifying your buyer.
Other requirements include the standard credit check and job history check. A good credit rating as well as at least two years of consecutive employment are usually necessary in order to get the best terms for a mortgage and to get the lowest interest rate possible.
It is not as difficult as it sounds in order to pre-qualify a buyer. This can usually be determined by a simple conversation where figures are discussed. With a small amount of due diligence, this process can be much simpler than it sounds and a profitable transaction can be completed.
Article Source: http://www.article-matrix.com
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