of your other debts. This is the total debt service (TDS) ratio. You may still qualify for a mortgage even if your TDS ratio is slightly higher. However, you’re increasing the risk of taking on more debt than you can afford. Other debts may include your monthly payments for:
-your credit card balances -your car loans -your lines of credit -your student loans -your child or spousal support -any other debts
HOW THE STRESS TES TRESS TEST IMPACTS YOUR QUALIFICATION Federally regulated entities, like banks require that you pass a stress test to get a mortgage. Lenders that aren’t federally regulated may also ask you to pass a stress test. This means that you need to prove you can afford payments at a qualifying interest rate. This rate is typically higher than the actual rate in your mortgage contract. Banks must use the higher interest rate of either: -5.25% -the interest rate you negotiate with your lender plus 2% That's the case for insured and uninsured mortgages. If you already have a mortgage, you’ll need to pass this stress test if you -refinance your home -take out a home equity line of credit People have been known to spend months looking for the best possible home and eventually find a good one. However, many of these individuals fail to understand the importance of finding a good loan. In the end, the new homeowner has a nice home, but a bad deal when it comes to the mortgage.
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