Guide to Qualify for a Conventional Loan
Category : Conventional Loan
A majority of the readers here have a full-time job and a mortgage on their primary residence, but they don’t know if they qualify for another mortgage. Being that I like to keep investing simple, I suggest newbies focus on conventional financing for their first investment property purchase and set a healthy down payment of 25-30%. It’s better to have a general understanding of loan lending requirements instead of becoming lost in the technical details.
Lending Requirements
- Your current salary
- Current debts (short term and long term)
- Credit history
- Employment history
- Payment history for current mortgage
- And most importantly, your debt to income ratio (DTI)
Debt To Income Ratio (DTI)
Bankers use DTI to determine how much money they can safely loan you without risking a potential default.
The banker will determine your DTI cap by multiplying your gross monthly income by the maximum debt percentage (I’ve decided not to include the front and back end ratio because I want to keep this simple).