Financing and mortgage: broker lending practice

Do you feel like you’re just another number yet? Well, finance is based on numbers, and people who deal with numbers are more often than not left-brain thinkers. These people who deal with numbers think analytically. They are numbers-oriented and they deal with cold, hard facts. The numbers either add up or they don’t, cut and dried. They are required to enforce policy standards. I’m trying not to offend these bright and intelligent people, because without their skill, this country would not exist.

Now picture this: Here is the right-brain thinkers’ view of things. The right-brain lives in space, seeing things in pictures and grandiosity. They always have an idea and a million questions to go with it. They ask, “Why can’t, what if, how about, why not, how come,” and to top it off, they will attempt to ring out the left-brain analytical types like a sponge, to collect further information to achieve their objective. These people include artists, salesman, public speakers, entertainers, designers, and politicians.

Well, when the smoke clears and the left brain numbers-cruncher gets over the initial shock of being blasted by the onslaught of right-brained gibberish, there’s usually a period of silence. You know what happens?

Yep, the right-brain extrovert starts talking again. At this point, the financial person is being asked to find some financial solution to the problem.

Normally, they can’t do it and stubbornly refuse to even consider alternatives because of the approach used by the right-brainer. What often happens is you will get a request for more information, documentation and research. They’re looking for numbers because they use qualifying ratios to solve problems. Here’s what I mean.

If you’re talking standard home loan, they often use a 28/36 ratio. What that says is 28 percent of your monthly income can be used to pay the mortgage principle, mortgage interest, property taxes, and property insurance. If you make $3,000 a month, you can afford to spend $840 a month on housing. That’s the front ratio. The back ratio is 36 percent. The lender says that up to 36 percent of your total monthly income can go toward paying for the mortgage plus credit card loans, auto/boat loans, student loans, and other similar loans, not to exceed 36 percent for everything.

Well, that leaves 64 percent leftover. Why don’t they count some of that? Here’s why. You often need that much a month to pay for electricity, phone, cable, water, sewer, garbage, heat, clothes, food, car insurance, gas and repairs, entertainment, furniture, toys, doodads, knickknacks, and everything else you come across that sounds like a must-have.

The 28/36 ratios are the limits that say you won’t default on your loan. But a military veteran will get ratios of 41/41, so shop around and ask about ratios and whether or not there are any special programs that may help you qualify for a certain loan amount.

That’s the basic conventional bank financing and mortgage broker lending practice. There are a hundred different ways to do something with all the variables so you need to investigate which programs are available and the guidelines used to qualify to be eligible.