Personal finances play a significant role in home loan approvals. All mortgage companies review your assets, income, credit and debts. These determine whether you qualify for a loan and for what amount. The following is information on income versus debt ratio for Perth Amboy NJ loan pre-approvals.

What Is Considered Income

Mortgage companies will consider your gross monthly income. This includes only items that can be documented. Wages are the most common source of income. You will be asked to furnish paperwork (such as W-2 forms) for the last two years, giving them a picture of stability. They may request explanations for any unusual items, such as changes in salaries or inconsistent amounts. Additional sources of income can include alimony, investment properties, and stocks. Any items that you would like counted must be verifiable. A history of earnings and possibility of future earnings is obviously important. The verification criteria can vary among lenders and certain exceptions may also be allowed. It is important to tell your mortgage consultant about all possible income sources to figure out what can or cannot be used.

Debt Analysis

Debt includes all current obligations such as credit cards and installment loans. The specific monthly payments on loans and other installment debt are used. For adjustable debt like credit cards, minimum monthly payments are applied. These figures are normally noted in your credit report. Some lenders may be willing to exclude debts with less than a year remaining in payments or that you can verify someone else is responsible for. The amounts are totaled to figure out specific monthly debt.

Information On Income Versus Debt Ratio For Perth Amboy NJ Loan Pre-approvals

Mortgage companies compare the total income to debt to determine the income versus debt ratio, which must remain under a certain amount. Furthermore, mortgage payments combined with your monthly debt must also remain within a certain percentage in order for your loan to be approved. The particular percentage will vary for each lender and based on the program as well.

For instance, some lenders may require your monthly mortgage payment (principal, interest, property taxes, and insurance) to remain under 28 percent of your monthly income. They may also not allow all debt to exceed 40 percent of monthly income. Based on these sample figures, a borrower making 60,000 annually (5,000 per month) would be approved for a 1,400 per month mortgage payment and 2,000 per month in combined debt. Keep in mind that this is merely an example and includes only the income versus debt part of the financial analysis that will be completed. There are many other factors, such as credit score and loan program requirements. It is essential to consult with a local loan originator for guidance on income versus debt ratio for Perth Amboy NJ loan pre-approvals for your personal finances.