Before properly preparing your mortgage file, you must first understand how the bank works in analyzing the file.
The Calculation Of The Debt Ratio.
The analysis of the debt ratio allows the lenders to make an initial decision on the admissibility of an FHA loan application. The debt ratio is a percentage that expresses the share of income devoted to FHA loans. Everyone agrees on a rate of 33% even if it is not compulsory. A higher percentage may be considered a potential risk of default by banks. Nevertheless, depending on the analysis of the customer profile, this rate may change downwards or upwards.
The Study Of Incomes.
After analyzing the debt ratio, the bank evaluates the subscriber’s income in order to anticipate his financial situation when he will have to repay his monthly payments. These income criteria are essential to continue the case study. They include several elements: first, the “remainder of life”, which corresponds to the part of the income remaining to the household to finance its current expenses once it has settled its borrowing expenses. In addition to the “remainder to live”, the “family quotient” is also evaluated. Corresponding to the annual disposable income per person, this family quotient is determined by the ratio between the net income excluding borrowing costs and the number of persons making up the household. Finally, the bank studies the future expenditure of the household.
The Calculation Of The Borrower’s Scoring.
In order to decide whether to accept or reject a file, the bank will continue its evaluation by drawing up a scoring. Based on a set of qualitative criteria, it will make it possible to give a note to the future borrower, indicating the quality of his file. This score will assess the level of risk taken by the bank if it agrees to lend the money needed to acquire the property. Variable from one bank to another, It is established on significant criteria such as:
- The personal contribution: between 10 and 30% (riskier below, less profitable above)
- The professional situation: the employment contract, seniority in the position
- The duration of the FHA loan: between 15 and 20 years (less profitable below, riskier above)
- Age of the subscribers: ideally between 25 and 50 years
- Family situation: considered “stable” during the term of the FHA loan
Not having a personal contribution or being in a precarious work situation does not necessarily stop you from getting an FHA loan. All scoring criteria will determine the overall scoring score. If the score is too low, the file will likely be rejected, but a high score will result in more favorable FHA loan terms.
Moreover, according to the scoring score obtained, the bank will be more or less demanding on the guarantees required.
How To Optimize Your Borrower Profile?
For borrowers, it is both a constraint, but it is especially an asset in the negotiation. Let us take the example of a couple of thirty who becomes an owner. He is likely to do some work afterward, to have children. He will need to open a savings book, to buy a car, to buy a car, so he has a good chance of getting his mortgage on the best terms.
Be careful, however: there are rules that must be respected so that a good profile appears as such in the eyes of the lenders. Indeed, the difficulty is not so much the rate, it is above all on the editing of the file that it stuck. At the slightest error of seizure, at the least missing piece, the file is rejected! It is also one of the contributions of your In & Fi Credit Credits broker to accompany you during this crucial stage. Reformatting files are often enough to be accepted.
First-time buyers are often the first victims of these rejections. Yet they are the ones with one of the most interesting borrower profiles for banks. Profiles that will house their income and subscribe to bank cards, insurance, complementary FHA loan. If they agree with the profile, if they agree to pay their salaries and subscribe to the home insurance of the bank, they will be able to lower rates of 0.3% to 0.5% on grids, for example.
Our advice: to carry out your FHA loan search, do not hesitate to have you accompanied by an In & Fi Credits broker. True credit specialists, they are in the best position to defend your case with banking organizations, enabling you to increase your chances of getting an FHA loan in the best conditions.