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By Brett Malvin | Agent in New York, NY

Condo Mortgages: Three Things to Know when Financing a Luxury Condo in New York City

Since 2008, home financing has been a challenge, and a lot of homebuyers have needed to jump through extra hoops to obtain financing for a luxury condominium. There are a few things that homebuyers should keep in mind when they're shopping around for a mortgage:

1. Your income doesn't matter as much as your credit score.While it is true that banks will try not to give mortgages to people who can't afford the payments (especially in this economy), homebuyers with several income streams or large capital reserves are different. Homebuyers with substantial equity in other properties or a number of investments in stocks, bonds, commodities, and business interests can use those as leverage to prove their ability to pay back a mortgage, allowing homebuyers to take out mortgages with monthly payments over 33-40 percent of their monthly income (the general standard throughout the mortgage banking industry). Especially when dealing with large loans and short payoff periods, the payment-to-income and debt-to-income ratios commonly used to calculate how much mortgage a homebuyer can afford are adjusted. The general rule of thumb: the more capital a homebuyer has, the more flexible the bank will be.

Credit worthiness, however, is unavoidable. A bad credit score will be a hurdle whether you make $50,000 or $500,000 per year. Anyone looking to get a mortgage of half a million dollars or more will need to prove extreme credit worthiness, and this is primarily done through a high credit score. In the past, good credit meant a FICO score of 650; since the subprime lending crisis of 2008, banks have been looking for higher scores above 680 or even above 720.

2. Keep your tradelines open. Making a good living and keeping your debt down? That's good, but it's important to keep those lines of credit open. Banks want to see that homebuyers are financially active. They should not only have the income to pay back their debts and a high credit score to prove they have been willing to pay back their debts in the past, but they should also have a number of open credit accounts to prove that they are financially active.

While it may seem counterintuitive, banks want to see that you have a lot of available credit before they give you more credit. The existence of other credit accounts proves that you have been deemed credit worthy in the past and open credit accounts prove that you still have a functional relationship with your creditors.

At the same time, you will want to keep your amounts owed low on all lines of credit, because this means you have more credit available and less credit used. Mortgage banks will calculate your "debt utilization ratio" or "efficiency ratio" to determine how much debt you currently have and whether you can afford more debt. They won't, however, worry about how much credit you have available to you.

3. Shop around, and then shop around some more. There are a number of legal guidelines that mortgage banks must follow when giving loans, but within those guidelines lies a lot of flexibility, which banks will use to privilege certain types of mortgages that they will consider best for their organization. For example, some mortgage banks will want to have a diversified portfolio of different types of mortgages, while others will specialize in just one type of mortgage. You should try to find out what different banks are willing to offer and whether they are willing to cut you a deal because they want your particular kind of mortgage.

At Condodomain, our financing and mortgage specialists are specially trained in finding the best lending options for our clients, so why don't you contact usthrough our website or at 1-877-852-6636 today and see what kind of financing options are available?

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