– Buyers need to have their debt under control. Monthly debt payments can not exceed limits required by the mortgage program that they would like to use. (The typical maximum debt allowed, including the projected mortgage payments, must typically be under 45 percent of the buyer’s gross income (before taxes). A recent change is that tax returns and tax payments must be up to date, filed with the IRS. The income that a buyer claims will be verified by the lender.
– The buyer has to have cash available for the down payment, closing costs and money left over as cash reserves in the event of an emergency. (Some lenders will consider funds in a retirement account to count toward reserves.)
– The buyer must be able to verify the source of funds for their down-payment money.
– The property being purchased needs to meet the lender’s guidelines and loan limits.
* It needs to be habitable, unless the buyer is using a rehab loan to purchase the property.
* Condos need to be in a financially stable condo association with condo documents and an association budget that meets the lender’s criteria.
* The property has to be worth at least what the buyer is planning to pay for it. The lender will verify the value and condition of the property with an independent appraiser.
Next week, I will address the myths and questions about financing.
Do you have any questions about getting a loan in the current environment?