Acceptable ratios are the key to affording the home of your dreams.  A ratio calculates debt and income.  Banks and other lending companies use two different ratios to determine if a borrower is able to afford the requested mortgage.  The resulting percentage of these ratios determines the eligibility of the buyer.

The first ratio a lender looks at when considering a mortgage loan application is the "housing expense ratio."  This figure takes into consideration all of the expenses associated with a specific property.  A percentage is then calculated by dividing the borrower's monthly income with the total figure associated with a specific home.  The cost of owning a home is greater than the purchase price.  Some additional expenses included in calculating the "housing expense ratio" in Frederick, MD are:

- Mortgage principal
- Mortgage interest
- Taxes (property, school, local assessments,)
- Insurance (hazard or home owner's, mortgage)
- Home Owner's Association fees

The other ratio a lender considers when determining a borrower's ability to repay a mortgage loan is called the "total expense ratio."  This figure calculates all of the items found in the "housing expense ratio" plus all other current debt obligations of the buyer.  This figure is then divided by the gross income of the buyer to come up with a percentage ratio.

If a buyer does not have an acceptable ratio to qualify for a mortgage, there are three ways to remedy the situation.  Some lending institutions will raise the maximum allowable ratio.  If you feel you have extenuating circumstances that should be considered, this may be an option for you.  Discuss this with your lender and request the maximum ratio allowed to be raised.  Real Estate Teams, LLC can help you find a lender willing to find a finance option for your individual needs. 

Another option is to lower your monthly expenses.  Take a close look at every item in your monthly budget.  Cut out any unnecessary items.  Reduce optional memberships and recreation services to a lower package, or consider canceling all together.  This will be an easier when you put the task into perspective.  Do you want more cable channels to watch or do you want the home of your dreams in Frederick, MD?  The third remedy is to increase your monthly income.  If possible get a part time job; dedicate that extra income toward your goal of home ownership in Frederick, MD.  A part-time job may be the bit of extra income that will push your ratios into the acceptable range.

Free information about buying, selling or investing in Frederick, MD real estate is available. To request free information about the Frederick, MD real estate market contact me, William Bill Price at bill@homes2price.com. 

Have questions?  Feel free to call me with your real estate or mortgage related questions. You can leave a message 24/7 at 1-800-395-9636 or use the form below and receive my free e-mail series of home buyer articles.