The new Good Faith Estimate will list out your loan amount, interest rate, monthly mortgage payment, origination charges, other settlement charges and total settlement charges. Unfortunately it does not break out these easily by line item as the previous version of the Good Faith Estimate did. What it also does not break out is “Total Monthly Payment including Property Taxes & Property Insurance. That’s important as the majority of borrowers pay towards those monthly and the new Good Faith Estimate does not provide that information. As a Loan Originator I think it will be helpful for a borrower to see the broken out line items and I am going to include that detailed information by providing both the new and old Good Faith Estimate form with any loan application package as an more detailed disclosure to my borrowers.

What no loan application or Good Faith Estimate shows is what your maximum qualification is for monthly payment and purchase price. A loan originator can quickly estimate that figure by calculating your Debt To Income ratio. That is calculated by taking your current monthly debts from a credit report and combining that figure with your proposed mortgage PITI (principal, interest, taxes, insurance) payment and dividing it by your gross monthly income. That percentage or ratio can not exceed 45% in most cases and is even lower for some loan programs. While this is a way to estimate the pre-approval amount the next step to insure potential loan approval is to run the loan scenario on an electronic underwriting system. That will take into account the Debt To Income ratio as well as other pertinent loan information such as loan amount vs. property value, mortgage insurance, borrower credit scores & history, assets and loan type.

The systems that have been put in place since the mortage market meltdown of the past several years will help to keep borrowers out of a position where their monthly payment exceeds a reasonable percentage of their income. While these processes will calculate your maximum approval amount it’s very important that you look at the monthly mortgage payment and whether or not you are comfortable with that payment or not. Just because you’re approved for a particular purchase price doesn’t mean you’ll be comfortable with the payment especially since you’ll likely have new expenses as a home owner. You as the borrower need to think about how much discretionary income you’d like to have after your required payment so you can do the things you’d like to do in life.

Feel free to contact me to go over this more in depth at (206) 399-1345

The new Good Faith Estimate will list out your loan amount, interest rate, monthly mortgage payment, origination charges, other settlement charges and total settlement charges. Unfortunately it does not break out these easily by line item as the previous version of the Good Faith Estimate did. What it also does not break out is “Total Monthly Payment including Property Taxes & Property Insurance. That’s important as the majority of borrowers pay towards those monthly and the new Good Faith Estimate does not provide that information. As a Loan Originator I think it will be helpful for a borrower to see the broken out line items and I am going to include that detailed information by providing both the new and old Good Faith Estimate form with any loan application package as an more detailed disclosure to my borrowers.

What no loan application or Good Faith Estimate shows is what your maximum qualification is for monthly payment and purchase price. A loan originator can quickly estimate that figure by calculating your Debt To Income ratio. That is calculated by taking your current monthly debts from a credit report and combining that figure with your proposed mortgage PITI (principal, interest, taxes, insurance) payment and dividing it by your gross monthly income. That percentage or ratio can not exceed 45% in most cases and is even lower for some loan programs. While this is a way to estimate the pre-approval amount the next step to insure potential loan approval is to run the loan scenario on an electronic underwriting system. That will take into account the Debt To Income ratio as well as other pertinent loan information such as loan amount vs. property value, mortgage insurance, borrower credit scores & history, assets and loan type.

The systems that have been put in place since the mortage market meltdown of the past several years will help to keep borrowers out of a position where their monthly payment exceeds a reasonable percentage of their income. While these processes will calculate your maximum approval amount it’s very important that you look at the monthly mortgage payment and whether or not you are comfortable with that payment or not. Just because you’re approved for a particular purchase price doesn’t mean you’ll be comfortable with the payment especially since you’ll likely have new expenses as a home owner. You as the borrower need to think about how much discretionary income you’d like to have after your required payment so you can do the things you’d like to do in life.

Feel free to contact me to go over this more in depth at (206) 399-1345