Financial information plays a key role in mortgage pre-approvals. All lenders examine your assets, income, credit score and debts. These affect if you may get a loan and how much of a loan you can obtain. Below is an explanation of income vs. debt ratio for Waltham MA financing pre-approvals.
Calculating Income
Lenders will consider your total monthly income. This counts only items that can be confirmed. Salaries are the most typical form of income. You will be required to furnish documents (such as tax forms) for the previous several years, giving them a picture of how stable it is. They may inquire about any unusual conditions, such as changes in wages. Alternate types of income may include spousal support, investments, and stocks. Anything that you wish to report as income must be verifiable. A history of earnings and possibility of future earnings can be helpful. The type of documentation needed will differ from one mortgage company to another and some exceptions might also apply. It is helpful to tell your lender about all valid income sources to determine what can or cannot be used.
Calculating Debt
Debt includes all monthly expenses such as credit card bills and personal loans. The specific payment amount on loans and other installment debt are used. For revolving items like credit cards, minimum monthly payments are used. These amounts are normally seen in your credit report. Some lenders may be willing to ignore debts with less than one year remaining in payments or that you can prove someone else is responsible for. The amounts are combined to identify specific monthly obligations.
An Explanation Of Income Vs. Debt Ratio For Waltham MA Financing Pre-approvals
Lenders compare the monthly income to debt figure out the income vs. debt ratio, which must fall within certain limits. Additionally, mortgage payments plus your total debt must also be lower than a specific percentage in order for your loan to be approved. The specific benchmark differs from one company to another and for each program.
Sample Scenario
For instance, a lenders may allow up to 28 percent for mortgage payments and 40 percent for combined debt.. Based on this example, an individual making 60,000 per year (5,000 per month) would be allowed up to a 1,400 per month mortgage payment and allowed 2,000 each month for combined debt.
Remember that this is strictly an example and includes only the income versus debt part of the financial evaluation that may be performed. There are additional considerations, such as credit rating and loan program restrictions. It is important to contact an experienced mortgage company for advice on income vs. debt ratio for Waltham MA financing pre-approvals specific to your personal finances.
