Episode 004 1995 - 96 Season
| Fireplace Installation | Steel Framing | Cutting Board | Fabrics | Entry Doors | Lawn Sprinkler Repair | How Do I Qualify? | |
To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #004.
Michael Holigan : The past couple of weeks we covered two of the big three questions - how much down plus how much per month, today we do how do I qualify? Well that's based on ratios. First off, what are ratios? Well a front ratio is a number that is multiplied times your monthly income and that shows you how much the lender will qualify you for a house payment. There's also a back ratio. That's a percentage that's multiplied against your monthly income and it shows you how much house payment, plus reoccurring debt that you qualify for. Reoccurring debt being car loans, student loans, bank loans, credit cards, debt that you have every month to make payments on. On a conventional program your front ratio is 28%. Your back ratio is 36%. Let's take a look right now at Veteran's loans. There is no front ratio, but the back ratio is 41%. It's expanded. You can afford more house and more debt with a Veteran's loan. The FHA loan is 29%, so a little bit bigger front ratio and 41%, an expanded back ratio, so you can afford more house with a FHA loan. Let's take an example, $60,000 as an annual income for a household. Divide that by 12 months in year. That gives you $5,000 a month gross income for that household. $5,000 a month times 29%, the FHA front ratio, gives you $1,450 worth of house payment that you qualify for. Now most people aren't worried about the front one. They can qualify for more house payment than they want. It's that back ratio that comes into play. $5,000 a month times 41%, the back ratio for FHA, is $2,050 per month for the house payment, plus reoccurring debt. So on this one, you could have possible debt of $600 if you wanted the maximum house payment you qualified for of $1,450, $2,050 minus $1,450 is $600 worth of reoccurring debt. But what if you have less debt than that? Let's say that you have $400 a month reoccurring debt, then you qualify for $1,650, but that is higher than our front ratio, so that one doesn't count. What if you have more debt, which most people do, a $1,000 a month, $2,050 minus a $1,000 reoccurring debt gives you $1,050. Now that's lower than your front ratio, but this is all you qualify for. Your house payment plus your debt, so watch that debt. Keep those credit cards as low as possible when you're thinking about buying a house.
Episode 004 1995 - 96 Season
| Fireplace Installation | Steel Framing | Cutting Board | Fabrics | Entry Doors | Lawn Sprinkler Repair | How Do I Qualify? | |
To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #004.