Just curious, but what determines how much money a bank will lend for a (auto or home) loan? Is it dependant on the borrower's FICO score, yearly income, a magic 8 ball, or a combination of several factors?

 

An auto loan is much easier to get than a home loan IMO. For me, they just ran a credit score and asked my annual income. Took about 10 minutes.

For a home loan, it is a little more involved, but they will look at FICO, AGI, LTV...etc..etc.

 

But what determines HOW MUCH money a bank will lend for a loan?

 

debt to income ratio, i.e. how much you can reasonably pay back. Ask a lender about it.

 

Your score, income, length of time at job, debt to income ratio, amount of previous paid loans.

 

I underwrite loans for a bank so I can tell you that they will look at your cash flow and debt/income ratio. Take your wages + any additional income from rents, dividends, interest income...etc. and determine what your monthly payments will be. For instance, on a LOC you will mainly be looking at monthly interest payments whereas a term loan of any type (car loan) will consist of P&I payments. You will be paying back more interest at the begiinning and more principal towards loan maturity. Divide your adjusted income by the monthly payments. Banks like to see at least a 1.30x coverage.

How much are you looking to borrow and what will be the use? Bank like to know exactly what the funds will be used for. If you own a home, then you can always go the HELOC route also.

Hope this helps.

 

[QUOTE]Originally posted by Kekoa