Debt and Housing Ratios- How Do They Affect Your Loan?

Debt-to-Income Ratio (Overall Debt Ratios)

Just as important as the Housing or front-end ratio is the debt-to-income ratio or DTI. This is the amount of your gross monthly income that goes toward paying all debts considered in a loan. Lenders consider 42-48% the golden range for DTI. Lenders will want to see lower DTI’s, but by using disposable income we can sometimes stretch these ratios over the 48%.

DTI can be calculated using the three factors from above and the addition of a fourth:

  • Monthly home payment
  • Monthly space rent
  • Monthly debt payments (car payments, mortgage payments, revolving credit, etc.)
  • Gross monthly income

Your monthly debt payments are all added into one number and used in a similar equation. Let’s use the same numbers as before and make your monthly debt payment $350.  Again, all you need to do is add, then divide to get your DTI. The equation looks like this:

DTI (43%) = ($720 + $800 + $350) ÷ $4,350

Again, you can use the same equation in the diagram above to see how much income or debt you would need qualify for the range of DTI ratios.

Why are debt & housing ratios considered?

As previously mentioned, housing and debt ratios are considered important to lenders because it shows how likely the borrower can make a loan payment. Borrowers with high DTI and housing ratios are more likely to be denied by lenders because of the possibility of the borrower defaulting on payments.

Calculating the ratios  using the equations above can give you a good idea in advance if you qualify.  We do have our disposable income program which may allow for higher overall debt and housing ratios

To find out more about our loan programs and to see if you qualify for a manufactured home loan, contact our office at 714-731-8080. You can also reach out to us via email at info@santiagofinancial.com

 

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Debt and Housing Ratios- How Do They Affect Your Loan?

Debt and housing ratios are two important factors taken into account when qualifying for a loan. In part one, we will explore housing ratios:

Housing Ratios (Front-End Ratios)

The housing ratio is used to assess how much income is needed in order to adequately repay your loan. Lenders will look at the housing ratio as a measure of risk. The higher the housing ratio is, the higher the risk that a buyer may default on payments on their loan. Typically, we try and keep the housing ratio in a range of 32-35%.

For manufactured homes, the housing ratio can be calculated using three different figures.

  • Monthly home payment (This includes: P&I, TAX IMPOUNDS  and INSURANCE IMPOUNDS.)
  • Monthly space rent (This amount will vary depending on the Mobile Home Park
  • Gross monthly income (How much you make per month before taxes)

With these three components, we can calculate what percentage of housing ratio you will have.

For example, lets say your monthly home payment is $720 per month, your space rent is $800 per month. We’ll use $4,350 as your income. To find your housing ratio, all you need to do is add, then divide.

Housing Ratio (35%)=  ($720+$800)  ÷ $4,350

By looking at the diagram below, we can see how much income is needed to qualify at a 35% housing ratio.

If you want to find out how much of a monthly payment you can afford, simply take your income and multiply it by 35%.

Lenders may allow for a higher ratio based on disposable income. For more information on disposable income, find out more about our loan programs and to see if you qualify for a manufactured home loan, contact our office at 714-731-8080. You can also reach out to us via email at info@santiagofinancial.com

 

 

 

Appraisal

What It Is

Manufactured home appraisals or property valuations are the process of determining the market value of a manufactured home. Appraisal reports are used in manufactured home loans. Appraisals are most frequently used in purchases and sales of manufactured homes but are also commonly used in refinances.

Sample

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Why We Need It

Appraisal reports are used in mortgage loans, settling estates, establishing a sale price, and taxation. The amount the manufactured home is estimated to be worth by an appraiser’s physical inspection of the home. This value affects the loan amount our underwriters approve the buyer(s) for. An appraisal also gives the homeowner a good estimation of the value of their home. In the case of purchases and sales, the appraisal is used to determine that the home’s contract price is correct given the location, condition, and features. For refinance cases, the appraisal assures the lender that the amount being loaned is not greater than the home’s value.

What We Look At

An appraisal review checks that the personal information and home information is correct on the documents as well as basic items about comparable sales. Appraisal value is calculated using comparable sales from the last six months in the park or community and takes into account physical aspects of the home. An appraiser will evaluate all aspects of the home and considers the age, location, quality, square footage, number of rooms, etc. of the home and creates an appraisal value from this information. Anything added to the home such as carpets, porches, awnings, air conditioning, etc. are all taken into account in the appraisal report.

Necessary Application Information

Below is all the necessary information for your credit application. It is important to complete the application to the best of your ability to receive approval as soon as possible.

  1. Profile Information
    1. Full Name
    2. Social Security Number/ITIN (same # used on W2s as well as taxes)
    3. Date of Birth
    4. Marital Status
    5. Phone Number
    6. Email Address (optional, but recommended)
    7. Current Residence Information
      1. Residence address
      2. Current resident date (move-in date)
      3. Payment type (rent, own, family member, other)
      4. Payment amount
    8. Previous Residence Information (only required if buyer has been living at their current residence less than two full years)
      1. Previous resident address
      2. Previous resident dates (move-in and move-out dates)
      3. Payment type (rent, own, family member, other)
      4. Payment amount
    9. Number of dependents and ages
    10. Gender
    11. Race and ethnicity
    12. Child support/Alimony Obligations
  2. Employment Information
    1. Present Employment
      1. Name of Employer
      2. Start date
      3. Address (optional)
      4. Monthly Income
      5. Occupation
      6. Phone Number
    2. Previous Employment (only required if buyer has been working at their current employment less than two full years)
      1. Name of Employer
      2. Start date
      3. Address (optional)
      4. Monthly Income
      5. Occupation
      6. Phone Number
    3. Other sources of income (Social Security, Permanent Disability, VA Benefits, Court Ordered Child Support, Rental Income, etc)
      1. Name of Other Source
      2. How long have you been receiving this income?
      3. Monthly Income Amount
  3. Home Information (not required if you are applying for a Pre-Approval)
    1. Is your home in a park or is it land home?
    2. If park, park name and space number
    3. Year
    4. Make
    5. Model (optional)
    6. Dimensions
    7. Decal (optional)
    8. Space rent amount/HOA Fee
    9. Source of Down Payment (savings, 401k, gift, cash at home)
    10. Seller contact information (optional if home is used)
    11. Dealer information (required for new homes)
    12. Manufacturer Invoice (required for all new homes)
  4. Sales Information
    1. Sales price
    2. Down payment amount
      1. Minimum is 5% of the sales price
      2. Minimum is 20% for all homes built prior to June 13, 1976
  5. Agent Information (if any)