Personal finances play a key role in mortgage pre-approvals. All finance companies review your assets, earnings, credit and debts. These determine whether you qualify for financing and for how much. Below is an explanation of income to debt ratio for MA financing pre-approvals.
What Counts As Income
Lenders will calculate your total monthly income. This includes only items that can be verified. Wages are the most common type of income. Lenders will request documentation (such as tax filings) for the last 2 years, giving them a sense of pattern. They may request explanations for any unusual items, such as changes in earnings or inconsistent amounts. Additional sources of income may include alimony, investment properties, and stocks. Anything that you would like counted must be verifiable. A history of earnings and likelihood of future earnings is obviously important. The documentation criteria may vary among companies and certain exceptions may also be allowed. It is important to tell your mortgage consultant about all possible sources to figure out what does or does not qualify.
Debt describes all current obligations such as credit cards and loans. The specific payment amount on loans and other installment debt are used. For revolving items like credit cards, minimum monthly payments are entered in the calculations. These amounts are usually noted in your credit report. Some companies may be willing to ignore loans with under a year left or that you can verify another individual is responsible for. The figures are added up to figure out specific monthly debt.
An Explanation Of Income To Debt Ratio For MA Financing Pre-approvals
Mortgage companies compare the monthly income to debt to come up with the income to debt ratio, which must stay within set limits. Additionally, mortgage payments plus your monthly debt must also remain within a specific percentage for loan approval. The exact percentage varies from lender to lender and from program to program.
For example, a lender may allow 28 percent for mortgage payments and 40 percent for total debt. Based on this example, a borrower making 60,000 per year (5,000 monthly) would be approved for a 1,400 per month mortgage payment and 2,000 per month in combined debt. Bear in mind that this is merely an example and considers only one part of the financial analysis that will be performed. There are many other factors, such as credit score and loan program restrictions. It is important to speak with a local mortgage company for information on income to debt ratio for MA financing pre-approvals for your personal situation.