Are you interested in borrowing money? Join Gerber FCU President/CEO as he briefly discusses the loan approval process at a credit union.
And what we look for in order to in a previous session we talked about credit scores and having a positive, a good credit score, is very, very important. both to lower your rate and to make sure you are able to be approved. collateral value of the item being purchased and debt to income ratios. so let’s take most of
Our time to talk about debt to income ratios. more than 45 percent of all your total debts in. so as an example, if you brought in $2,000 per month then you could have no more than $900 in total debts to get a regular policy approval from us. now, there are always mitigating factors and we have approved
People who have more than a 45 debt ratio. and that’s why you work with us and your credit union because we are able to make exceptions to these types of things. but that would include a car loan, that would include a credit card payment, that would include your housing expense whether it be rent if you’re talking about
A mortgage included in that is going to be your principal and interest payment, the assumed escrow for property taxes and that number typically we want to be no more than 20 to 25 percent as part of the overall 45 percent. and then the others, student loan payments, car make up the remainder of that up to 45 percent. so
How you adjust for that is a lot of times people will refi or refinance existing debt to lower the payment by extending the amortization. so they might take their mortgage from a 15-year pay back to 30 which will lower the payment, it might raise the rate a little bit, it will be easier on your monthly budget, the
Only issue with that and something to consider is, that over the life of that loan now since you’re paying for an additional 15 years you’re going to pay a lot more in interest on that than if you were able to buckle down and keep it on the shorter term. so when you get something in the mail that says we can
Lower your payments, well the way they’re lowering your payments is by having you stretch so be very wary of those types of things. is collateral value compared to how much we’re you’re going to buy a car, we can lend you fully including taxes and title and all the rest of things that need to be filed at the
Secretary of state’s office. again, that’s somewhat dependent credit score the more we can advance against the purchase of the car including sometimes greater than 100 percent of the purchase price. if you have a lower score then we might be able to only approve 80 or 90 percent and might require a down payment.
So just a couple things to consider as you’re going through the loan application process and how we look at things. debt to income is very, very important. no more than 45 of total debt collateral value and how much it’s going to how much we’re able to advance. thanks for watching!
Transcribed from video
Finance 101 – Loan Process By Gerber Federal Credit Union
