Financial information plays a significant role in loan approvals. All finance companies evaluate your assets, earnings, credit and debts. These determine whether you can obtain financing and for what amount. The following is information on income versus debt ratio for Burlington MA mortgage pre-approvals.
Lenders will consider your gross monthly earnings. This includes recurring items that can be confirmed. Salaries are the most common type of income. You will be required to provide paperwork (such as W-2 forms) for the previous two years, giving them a sense of how stable it is. They may request explanations for any unusual items, such as fluctuations in earnings or inconsistent amounts. Alternate types of income may include alimony, investments, and stocks. Any items that you would like counted must have valid supporting paperwork. A history of earnings and possibility of future earnings is naturally very helpful. The documentation standard can vary among lenders and some exceptions may also be allowed. It is important to inform your mortgage consultant about all possible income sources to figure out what can or cannot be used.
Debt describes all current obligations such as charge cards and loans. The specific monthly payments on loans and other installment debt are used. For adjustable items like credit cards, minimum monthly payments are applied. These figures are usually noted in your credit report. Some companies may agree to exclude loans with under one year remaining in payments or that you can verify someone else is responsible for. Payment figures are totaled to calculate specific monthly obligations.
Information On Income Versus Debt Ratio For Burlington MA Mortgage Pre-approvals
Lenders compare the total income to debt to come up with the income versus debt ratio, which must stay under certain limits. Additionally, mortgage payments and your monthly debt must also not exceed a certain percentage in order for your mortgage to be approved. The exact percentage varies from lender to lender and for each program.
For instance, a lender may allow 28% for mortgage payments and 40% for total debt. Based on this example, 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 total debt. Keep in mind that this is strictly an example and considers only the income versus debt part of the financial analysis that will be completed. There are additional factors, such as credit score and program specific requirements. It is essential to consult with a local lender for information on income versus debt ratio for Burlington MA mortgage pre-approvals for your personal finances.