qualify

Can You Buy A House? How To Find Out If You Can Qualify For A House



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hello everyone Hadden welcome to another

real estate video this is javi every

Danya the real estate YouTube guy here

at Phoenix Arizona helping you

accomplish your home goals with the itch

in his nose hopefully that wasn't a

burger anyways today's video is going to

be a little more detail-oriented

informative it's something that I go

with every single buyer that comes into

my office it does the initial

appointment consultation whatever I

always take them down this process of

what it means to actually qualify for a

house or what determines what you what

qualifies you for the house would amount

all that good stuff and I always go

through it even though it's a little

more more details and more information

that they really need I like going

through it because I want people to

understand what's going behind it why

are you only qualifying for this amount

what is preventing you from moving

forward to this type of loan and what

someone else got this type of loan so if

you've had some issues qualifying for a

home in the past or you're just curious

why you qualified for the type of loan

you did and why not you qualify for more

pre-qualification amount or whatever

this is a good video for me to learn

from so for those who are watching and

this is your first video welcome to the

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then my home so that's gonna come out

soon but anyways let's get to it so what

determines if you can qualify for a home

well the easiest way that I've described

it to people is there's three main

categories that are established that you

have to basically the first two

categories are just check boxes that

have to have check mark they don't have

any determination on what your

pre-qualification amount is or any of

that stuff but it has to be something

that has to get approved and there's not

a way to skip past something or you know

it's saying oh well this isn't great but

this is really great it has to be

checked box so the first two categories

have to just be approved doesn't really

a really affect anything else and the

final category is what's actually

determining what your pre-qualification

amount is so I'm gonna walk you through

each step and if it works for if every

single step works in your favor then

you're probably ready to buy home so

is going to be your credit score if

you're going with an FHA loan which is

your standard first-time homebuyer loan

the minimum credit score can be six

hundred now there's people out there

mortgage people out there they're a lot

more flexible with the guidelines to say

hey you can go as low as five eighty

nine goes latus 560 but just know that

there's consequences to that if they can

go lower than that then they're probably

making it up somehow they're probably

you know doing something with the

interest rate or who knows what I just

know in general 600 is the minimum

credit score for a regular FHA loan for

conventional if your minimum credit

score is about 640 however the two main

differences between FHA conventional

plug if you haven't seen this video I

break it down a lot more detailed is FHA

has the pro and con of it not being so

judgmental towards your credit score and

conventional is very judgmental towards

your credit score FHA doesn't matter if

you're at 601 credits for your at 800

credit score you're getting the same

substandard mortgage insurance and same

lower interest rate than everybody else

with FHA is getting with conventional

you could be at 640 barely qualifying

and they're Gargan up to UL they're

gonna give you high credit they're gonna

give you really high mortgage insurance

they're more judgmental on you know past

mistakes you might have your credit but

with if you're at a 800 credit score or

seven five 700 s they're gonna treat you

like royalty you're gonna get a better

interest rate you're gonna get better

mortgage insurance all that fun stuff on

top of that mortgage insurance

FHA you'll have it for the all your rest

of your life for the 30 year loan

conventional once you reach 8020 low no

value it'll drop off if you want a more

specific detailed video about that there

it is right there

but anyways those are the two main ones

and those are the credit scores needed

for it so for conventional technically

if you're at at 640 you could go

conventional but odds are they're

probably gonna be close you put better

off putting you in FHA because the

interest rate in the mortgage insurance

is gonna be much better although some

people have known them to install go

conventional because this is a forever

house and they eventually want to pay

off to the point where the mortgage

insurance has gone however if you're in

the 600's odds are they're gonna be

putting you at FHA now this doesn't

include downpayment assistance because

in my pain guys nowadays downpayment

assistance is not very much use anymore

it's still being used sure

but a lot of buyers are just opting for

their down payment however if you are

interested in down payment assistance

I've known the credit score's minimum to

be about 660 around there there are

programs out there that you need to be

at least at 640 but 660 is probably

gonna give you the best bang for your

buck that being said those are the

credit scores needed and as long as you

meet those minimum credit scores you are

able to go to forward through that

specific loan just keep in mind if your

conventional you're a barely qualifying

they're probably gonna recommend you go

through FHA just because it'll just save

you so much money on the monthly payment

route if that checkbox is checked mark

great now we go to the next one which is

a two-year work history so the preferred

option the ideal like Series A is that

you've been in your job the same exact

job same exact maybe different position

but in the same issue position for the

last two years that's the best-case

scenario the if you're not at that route

will they at least want you be in the

same field the same kind of job so if

you're a different company but the same

kind of same type of job well then as

long as you have two years of that then

that's fine now if you completely switch

career paths this is where can get a

little tricky so if you have two years

total work history or even more however

somewhere in between you switch to a

different career path well I believe

they need at least minimum six months of

pay stubs in the new career path and as

long as both jobs add about to about two

years you should be fine

and last but not least if you went to

school for the job you're currently in

so let's just say you know you're in

school for one or two years you

graduated and now you only have one year

and your new job well they can use that

schooling as part of your to your work

history in some situations so there are

some workarounds but they're logical

workarounds you know if you the common

example I like using is if you rich

plumber for a year then you decided to

go be a stripper although somebody in

the comments once said well they're

technically the same job because they

both show crack as long as you have six

months as a new job and you have two

years total work history odds are a

lender can be creative and figure it out

now if you are under the two-year work

history mark and you don't qualify for

any of these exceptions that I'm listed

well I'm afraid to say you're gonna need

a two-year work history

there are some exemptions and some

things that might work and if it once

again has to be logical if it's just

like you literally just got a job a year

ago there's an you know if you didn't go

to school beforehand there's no other

logical conclusions of why it didn't

work that way well then you know maybe

you have to figure something out there

so if you got checkbox a mark your

credit score is above the score you

needed check box to mark which is hey

you have the two-year work history or

you have some kind of workaround well

then you're good you got those two

cleared now we go to the main one which

is your debt to income ratio so pull out

your pens and papers for this section

because I'm gonna kind of speak and I

want you to kind of go through and work

that worksheet with me so your debt to

income ratio is essentially your debt

divided by your gross income gross

meaning the money you get paid before

taxes before health insurance before

everything's taken out yes it is kind of

broken because technically your gross

income isn't when you take home however

this is what lenders used now if you're

self-employed 1099 then they use your

net income so they use the money that

you actually claimed on your taxes or an

average of the last two years there are

some you know exceptions where they can

add certain things back into your net

income like for example when I bought

homes they were able to add certain

things that I deducted back in there so

your debt equals your minimum monthly

payments plus the potential payment of

your house your minimum monthly payments

are what pops up on your credit report

we're not talking utilities we're not

talking phone bills we're not talking

cell phone bills or not talking with any

of that

it's what pops up on your credit score

so credit cards lines of credit card

payments of things you've co-signed for

which is why I always say be careful

when you're cosign stuff like that will

pop up so let's do a very basic example

let's say you have two credit cards and

once again they use the minimum monthly

payment it doesn't matter if it's a

billion dollar balance if the minimum

monthly payments only $40 that's the

number you're using so let's say you

have two credit cards out of 500

thousand dollar balance I know they'll

say you're a baller and the minimum

payment is $50 each well if $50 plus $50

equals $100 that's your total for your

credit card so now let's say you have a

car payment as well and your car payment

is about three hundred dollars every

month so that's going to be already $200

of

credit card payments plus the $300

that's $400 total so now let's just say

that's all your total minimal monthly

payments and if you're following me at

home make sure to be write down

everything here and I would be

conservative its if it's like $32 I mean

a monthly payments put 40 or 435 be you

know try to be conservative now that

you've calculated that you want to add

that with your potential payment of the

house you're buying so in this case I

don't know what the taxes or insurance

are in your area so try to if you're

looking online and you're looking for

houses already you have an idea try to

use the calculator they have online and

make sure that calculator includes your

principal your interest your taxes your

insurance and your mortgage insurance if

you have your taxes are about 1,500 to

2,000 dollars a year and you're looking

at a two hundred thousand dollar range

and let's just estimate your payment to

be on a fourteen hundred dollars so

let's just use that number so by now you

probably already want to go look online

you have an idea of your price range and

your monthly payment ish around there so

what you're gonna do it so let's just

use my example it was four hundred

dollars or totally minimum monthly

payment obligations we're gonna add that

with the potential payment of the house

at 1400 once again being conservative

here helps because you know you have a

good idea that equals $1,800 so my total

debt is going to be $1,800 now if we

divide that by your gross income so if

you have a spouse here or you have a co

borrower that's gonna buy the house with

you you can use both gross incomes but

if you do that make sure that you're

also adding his debts on top of there so

that's why sometimes it doesn't help to

have you know more borrows because it'll

only have more income they might have

more debts than you do in this example

let's just say this person makes $5,000

gross income

once again they could only be taking

home 38 or 4,000 it's all about that

gross income so let's say they make

$5,000 a month so it's $1,800 divided by

$5,000 and according to my calculations

that equals 0.2 36 or 36 percent so in

this situation they do fall under under

50% and they do qualify so not only that

but there's some space to play around

with the numbers so technically I think

I have to look it up FHA might be 45% I

always say under 45% is probably where

you need to be and also on top of that

want to be careful right you don't want

to have half of your income goes towards

a house so not only that but there's

some numbers we'll play around there

right let's say you add the monthly

payment instead of being 1400 we add it

to 1800 and then we add the $400 of

minimal debts and then you divide that

by 5,000 well technically you're still

have 44% debt-to-income so that means

you wouldn't be able to qualify for a

monthly payment of $1,800 technically

now just because you're able to doesn't

mean you always should so just be very

careful here so in this case you would

qualify for a payment of $1,800 so one

way to find out this a little more

certain that you can work backwards so

let's just say we're trying to be under

50% that's income Rachel if your gross

income is let's say $4,000 well

regardless of what's on the top debt

section if you know for sure it needs to

be under $2,000 because you know what's

half of 4000 it's 2,000 so if you know

that top number needs to be 2,000 well

then you can work back so if you're

minimal monthly obligations are I don't

know let's say $1,000 of because you

have a lot of student debt or you have a

credit card you have other fun stuff

like that I'm sorry God and I freakin

watch is going off right now let me put

it on mute then that means you only

qualify for a payment of $1,000 and

nowadays $1,000 payments are very far

and few in between so then you can start

working back there and this is why I

always say that maybe paying off a

credit card might not be the best option

to help you because if you have a minute

I paint a credit card of a thousand

dollars and it's a forty dollar minimum

monthly payment well if you spend those

thousand dollars towards that all you

really did is take $40 off that equation

and it's not really helpful if this is

just so you can get an idea obviously

once you talk to the lender they're

gonna calculate this this is kind of

pre-emptive just to kind of help you get

an idea so if the numbers you're getting

aren't under fifty percent then there's

three things I need to happen very

clearly one is your income needs to be

higher so that means either go get

another have to go get another job or

get a promotion there were a lot of

people it's not as easy to just go and

make more money the second thing is your

minimum monthly debts need to go down

and this is where you need to talk to

the lender and see if they can give you

an action plan of what to pay off of

what to prioritize or the third thing is

your monthly payment needs to go down so

maybe you're in a situation where your

minimum payments are okay but your

income isn't so great well that means

that your monthly payment needs to go

down so if the equations tried working

with the numbers until you find out

something that's under that 50% or

preferably closer to 40% and that's what

really determines what amount you

qualify for a home for so once you

figure that out and it works still then

you're essentially mark off that third

category and if all three categories are

green then you you're ready to go of

course there's several other factors to

consider like affordability should you

buy a house are you ready financially

how much is in your savings etc etc

however we're just thinking speaking

specifically logistically about if

you're able to buy a home so if you

check off these track card in three

categories

odds are you're definitely ready to buy

a home so now is the time to have a

conversation if on if you should buy a

home so thank you guys for watching our

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