Lenders usually will lend the
borrower up to a certain percentage of the appraised value of
the property, such as 80 or 90 percent, and will expect a down
payment making up the difference. If the appraisal is below
the asking price of the home, the down payment you planned to
make and the amount the lender is willing to lend you may not
be enough to cover the purchase price. In that case, the
lender may suggest a larger down payment to make up the
difference between the price of the house and its appraised
value.
When looking at your projected mortgage payment and
existing debt, some lenders might use ratios such as “28 and
36” to determine whether you qualify for the loan. These are
commonly used ratios.
In the case of "28 and 36," the 28 refers to the
percentage of your gross income (before taxes) that may be
spent on housing expenses, including principal and interest on
the mortgage, real estate taxes, and insurance. The 36 refers
to the income that may be spent for payments on all your debts
(including the mortgage): the monthly payments on your
outstanding debts, when added to the monthly housing expenses,
may not exceed 36 percent of your gross income. When you talk
to a lender, find out what ratios will be used to evaluate
your application. Then use Worksheet 2 to
calculate whether you are within the lender’s guidelines.
