If you live in Columbia SC and are thinking about buying a home one of the first things you should do is go to a lender and get pre qualified. This will help you determine how much you can borrow on a mortgage. This will also help you filter your home search by sales price.
So just how does a lender determine how much you can borrow? Well just remember the three C’s (Credit, Capacity, and Collateral).
Credit or FICA score is determined by:
How much debt you have out there.
How much debt you have out there as a percentage of open credit accounts.
How much debt you out there in different types of accounts (credit cards, auto loans, mortgages, student loans)
How well you pay your debt.
Capacity or Income:
If your credit score is good then a lender will look at your income, how much you bring home; and how much is left after you pay all your debt each month. They generally determine your total mortgage payment, less other debt payments, allowing up to about 35% to 40% of your gross income.
Collateral or property is determined by:
In Columbia SC when you decide to buy a home and you have the credit score and the income then you are deciding to get the collateral or the Property and this is determined by an independent appraiser. Once you have chosen a home to buy you will pay the lender and they will order and independent appraiser to determine a market value of the property. And a lender will lend you up to a certain percentage of the value (or purchase price whichever is lower) like 80% Loan to Value (LTV) or 90% (LTV). This depends on the lender or the bank program you qualify for. So even if you qualify for a higher loan amount, the MOST any one bank will lend you on any particular property is up to their maximum allowed loan to value percentage on that property.