Mortgage Qualifications

Lenders generally base mortgage decisions on these five factors:

1. Income Stability
   Any income that can be verified and has a 2-year history such as investment interest,commissions, royalties, social security, disability and alimony payments, in additionto your salary, counts to your advantage.
   
   
2. Debt-To-Income Ratio
   Lenders prefer that the proportion of your combined debt and housing expense beno more than 36% (28% for housing and 8% for debt) of your monthly pre-tax income.Housing expenses usually consist of principal, interest, taxes and insurance (PITI),but can also include maintenance.
   
   Other debt includes credit card balances, installment loans and anything else youmight owe. Our monthly payment calculator can help you determine your monthly housingexpense. If your individual situation is different from the standard ratios outlinedabove, don't despair! Wells Fargo Home Mortgage has programs that accommodate manyfinancial situations. Please contact a Wells Fargo Home Mortgage consultant todayfor a personalized assessment of your needs.
   
   
3. Loan to Value (LTV)
   Loan to value (LTV) is the ratio of your loan amount to the value of your property.This ratio tells a lender how much equity you will have in your home. The higheryour equity and the lower your LTV, the larger your stake in the investment andthe less risk there is for the lender. A LTV of 80%, for example, means that youare putting 20% down and borrowing 80% of the property's value. Borrowers with lessthan 20% equity are generally required to buy Private Mortgage Insurance (PMI) whichprotects the lender in case of a loan default. Loan-to-value guidelines are determinedby the borrower's circumstances and the type of loan. At Wells Fargo Home Mortgage, a borrower can put down as little as 3% of the property value and still qualifyfor a new home.
   
   
4. Property Appraisal
   This is a professional assessment of your property by a licensed appraiser to makesure that its market value is sufficient for the loan amount. A lender needs toknow that the borrower's collateral (property and down payment) will cover the loanamount in case of default.
   
   
5. Credit History
   Naturally a lender wants to know your payment habits before giving you a large sumof money. It's a good idea to check your credit report before you begin the processin order to correct any errors or to improve your creditworthiness.

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