Information On Income Versus Debt Ratio For PA Loan Pre-approvals

Personal finances play a big role in loan pre-approvals. All finance companies review your assets, income, credit and debts. These determine whether you can obtain a mortgage and for how much. Below is information on income versus debt ratio for PA loan pre-approvals.

Income Analysis

Mortgage companies will consider your total monthly income. This includes recurring income that can be confirmed. Wages are the most common form of income. Lenders will require paperwork (such as W-2 forms) for the previous 2 years, giving them a picture of stability. They may inquire about any unusual items, such as fluctuations in salaries or inconsistent amounts. Additional types of income may include alimony, investment properties, and stocks. Any items that you would like counted must have valid supporting paperwork. A history of earnings and likelihood of continued earnings is obviously very helpful. The verification standard can vary among companies and certain exceptions may also be permitted. It is important to inform your lender about all possible sources to figure out what does or does not qualify.

Debt Analysis

Debt describes all current obligations such as charge cards and loans. The exact payment amount on loans and other structured debt are used. For revolving debt like credit cards, minimum monthly payments are used in the calculations. These amounts are usually noted in your credit report. Some lenders may be willing to ignore loans with less than a year left or that you can prove another party is responsible for. Payment figures are totaled to determine total monthly debt.

Information On Income Versus Debt Ratio For PA Loan Pre-approvals

Lenders compare the monthly income to debt for the income versus debt ratio, which must stay within certain limits. Additionally, mortgage payments plus your monthly debt must also not exceed a certain percentage in order to secure approval. The particular percentage varies from lender to lender and based on the program as well.

For example, some companies may limit your total mortgage payment (principal, interest, property taxes, and hazard insurance) not to exceed 28 percent of your monthly income. They might also not allow all debt to exceed 40 percent of monthly income. Based on these figures, a borrower making 60,000 annually (5,000 per month) may be allowed up to a 1,400 per month mortgage payment and 2,000 per month in combined debt. Keep in mind that this is strictly an example and includes only the income versus debt part of the financial analysis that will be performed. There are additional factors, such as credit score and program specific requirements. It is important to speak with a local lender for advice on income versus debt ratio for PA loan pre-approvals specific to your personal finances.