Financial information plays a key role in mortgage approvals. All mortgage companies review your assets, earnings, credit and debts. These determine whether you qualify for financing and for how much. The following is introduction to income to debt ratio for New Hampshire financing pre-approvals.
Lenders will calculate your gross monthly income. This includes only items that can be documented. Salaries are the most common form of income. You will be asked to provide documentation (such as W-2 forms) for the last 2 years, giving them a picture of stability. They may inquire about any unusual items, such as fluctuations in earnings or inconsistent amounts. Alternate types of income can include alimony, investment properties, and stocks. Any items that you would like counted must have acceptable documentation. A history of earnings and likelihood of continued earnings can be very helpful. The verification criteria may vary among companies and certain exceptions may also be allowed. It is important to tell your loan officer about all possible income sources to figure out what does or does not qualify.
Debt includes all monthly obligations such as credit cards and installment loans. The exact payment amount on loans and other installment debt are used. For adjustable debt like credit cards, minimum monthly payments are used in the calculations. These figures are normally noted in your credit report. Some lenders may agree to exclude debts with less than one year remaining in payments or that you can verify another individual is responsible for. Payment amounts are totaled to figure out specific monthly debt.
Introduction To Income To Debt Ratio For New Hampshire Financing Pre-approvals
Lenders compare the total income to debt for the income to debt ratio, which must remain within a certain amount. Additionally, mortgage payments combined with your monthly debt must also stay within a specific percentage for loan approval. The particular percentage can vary among mortgage companies and from program to program.
For example, a lender may allow 28% for mortgage payments and 40% for total debt. Based on these figures, a borrower making 60,000 per year (5,000 per month) would be allowed up to a 1,400 per month mortgage payment and 2,000 per month in total debt. Keep in mind that this is merely an example and includes only the income versus debt part of the financial analysis that can be completed. There are many other factors, such as credit history and loan program specifications. It is essential to consult with a local mortgage company for guidance on income to debt ratio for New Hampshire financing pre-approvals for your personal situation.