To begin with a $150,000 over a 25 year period at prevailing interest rates is going to cost approximately $800 per month. Adding property taxes to this number assuming $2400 a year for taxes brings the monthly payment up to $1000 / month. This is of course an estimate since the actual tax amount will depend on the home that is purchased. This level of monthly payment places then at the high end of what is normally considered by many banks. The ratio of principal , interest and taxes should not exceed 40% and most banks are looking for a lower number.
With only $10,000 to use as a down payment, they are looking for what is called a high ratio mortgage which usually attracts a higher interest rate driving their monthly costs even higher. Typically lenders are looking for a minimum of 15% of the cost of the home as a down payment. they should have closer to $23,000 as a down payment to meet the minimum down payment criteria.
They both hold stable jobs and have been at their jobs for a period of 5 years which is definitely in their favor.
Although they have a zero balance on their credit cards, they do have 10 credit cards between them. This is quite a few credit cards. They do not indicate what the maximum approved credit limits for these cards are. They could be $5,000 each representing another $50,000 in potential debt. Anyone doing a credit check on this couple is going to see a good credit rating in terms of meeting payments etc,. However once they see that they have as many credit cards as they do and given the high ratio mortgage they are looking for, the decision will be negative in terms of approving a Home Equity Mortgage Loan.
Our reviewers feel that this couple should do the following to improve their credit worthiness :
Taking these steps will help to improve the odds of being approved for a Home Equity Mortgage Loan.
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These posts about debt and mortgages are great. I wish I had someone doing this for me when I was growing up