A mortgage is the largest financial obligation that most people will have in their lifetime. When you are looking to get a mortgage, you want to have all of your financial ducks in a row before you even reach out to a lender. When your financial affairs are in order and you know exactly what you are worth, your chances of getting a good mortgage are much higher.
How Much Income Do I Need to Get a Mortgage?
Mortgage rates, your net worth and your income often go hand-in-hand because your net worth and your income do influence the mortgage amount that you can qualify for. The exact income that you will need will depend on many factors, such as the amount of the mortgage that you are seeking, your credit score and whether you have a positive history with your chosen lender.
How Does a Lender Work to Calculate My Net Worth?
Your net worth provides lenders with information on how you handle your finances and how well you will be able to satisfy the repayment agreement associated with your mortgage. Because of this, you want to know approximately what your net worth is before you even head to your lender. The following information is used by lenders to calculate your net worth:
a) The value of any property that you currently own
b) The amount of your mortgage, as well as the mortgage term, your interest rate and the down payment that you put down on the mortgage
c) The estimated back ratio and the estimated front ratio
d) Insurance and tax information, including the annual insurance on any properties that you own, the annual taxes on any property that you own and the annual PMI associated with the property
You can also compare your net worth to that of others in your age group to get a general idea about where you stand. This can help you to determine if you have some room to negotiate with your lender, or if you may be subject to a higher interest rate or a lower total mortgage amount.
Securing a Great Mortgage
To secure a great mortgage, you want to ensure that all of your financial affairs are in order. Your net worth should be enough to where you can easily handle the required monthly payments for your mortgage. This means that you should also have a good income and a low amount of debt. If your financial situation is not in the greatest standing, working to make some improvements will increase your chances of securing a good mortgage with a good interest rate in the future.
Many people are not aware of their net worth, but this is definitely information worth knowing. It is even more important if you are looking to secure significant funding, such as with a mortgage. You want to know where you stand financially so that you have some leverage to help you in securing a good interest rate for your mortgage.