The Purchase Power Module estimates a client’s maximum buying power if they sold their current home and used the proceeds as a down payment.
Here's a step-by-step breakdown of how it works:
1. Eligibility Check: Ownwell first determines if the client is eligible for a new purchase by ensuring the equity in their current property is positive.
In this scenario, the home equity is assumed to be the down payment.
This approach simulates the client’s buying power if they sold their existing home today and didn’t contribute additional funds to the down payment.
2. Maximum Home Price Estimate: Ownwell calculates the client’s maximum home price and mortgage using:
The down payment (derived from home equity).
The client’s income and debt payments.
Maximum GDS (Gross Debt Service) and TDS (Total Debt Service) ratios, set to 39% and 44%, respectively.
3. Finding the Best Rate: Ownwell searches Lender Spotlight to identify the lowest available rate for the maximum purchase amount determined in the previous step. The search considers key factors such as the client’s income, credit score, debt payments, and LTV (loan-to-value ratio).
Important Note for Alt/B Clients
If the Client's Current Lender Is Determined To Be Alt/B: Ownwell infers if a lender is “Alt/B” based on its name in the “Current Mortgage” section of the Client Details page. If we determine it’s Alt/B, Ownwell only considers Alt/B lenders for the Purchasing Power analysis.
Currently, Ownwell does not cap the loan-to-value (LTV) ratio at 80% for Alt/B clients. Because we aim to find the maximum possible home price, Ownwell sets the LTV as high as possible. However, most Alt/B lenders only allow an LTV up to 80%. As a result, Ownwell can’t match Alt/B clients with any suitable rates in Lender Spotlight, and therefore cannot display a Purchasing Power estimate for them. We plan to fix this issue in early 2025 by conditionally setting the LTV cap to 80% for Alt/B clients.
If the Client's Current Lender Is a Bank, Monoline, or Credit Union: Ownwell does not restrict which lenders it considers. This means you’ll see the lowest rate available from all lender types.
4. Qualification Check: Using the rate identified in the previous step, Ownwell performs a final qualification check with the stress test to confirm the client’s maximum mortgage amount and purchase price. This calculation ensures the client meets income and LTV requirements.
By combining these steps, Ownwell provides a clear and reliable estimate of the client’s purchase power, helping you guide them through their home-buying journey.