Common questions borrowers ask when applying for mortgages cover topics such as the best rate, the required amount of the down payment, what amount they qualify to borrow, and what the lender considers when deciding whether to approve them, according to LinkedIn. Borrowers also ask whether they should go with a variable- or fixed-rate mortgage and what credit score they need to be approved for a mortgage.Continue Reading
Credit scores mostly determine the rate borrowers receive for their mortgages, notes Linkedin. Borrowers with poor credit scores are likely to get higher rates, because they are seen as larger risks than those who have higher credit scores. Down payments on homes typically have to be at least 5 percent of the purchase price, but borrowers need to put down at least 20 percent for their down payments to avoid mandatory mortgage default insurance.
Gross Debt Service ratio and Total Debt Service ratio determine the maximum mortgage amount for which a person qualifies, according to LinkedIn. As of 2016, a borrower's Gross Debt Service ratio should be no more than 32 percent of his total monthly income while his Total Debt Service ratio should be no more than 40 percent of his income. The lower these ratios are, the better.Learn more about Credit & Lending