Financial figures play a large role in loan pre-approvals. All finance companies review assets, earnings, credit score and existing debts. These determine if you may get a mortgage and the amount. Below is an explanation of income versus debt ratio for Washington financing pre-approvals.
Lenders will look at your gross earnings per month. This includes recurring items that can be verified. Salaries are the most common source of income. You will be asked to present documents (such as tax forms) for the previous several years, giving them a sense of pattern. They may inquire about any unusual items, such as inconsistent figures. Additional income sources may include alimony, investment properties, and stocks. Any items that you would like considered must be verifiable. A history of earnings and possibility of continued income is obviously very helpful. The amount of documentation needed may vary among lenders and certain exceptions may also apply. It is important to inform your loan officer about all valid income sources to figure out what may or may not be used.
Debt describes all monthly obligations such as charge cards and personal loans. The specific monthly payments on loans and other fixed-payment debt are taken into account. For revolving debt such as credit cards, minimum monthly payments are entered in the calculations. These figures are typically listed on your credit report. Many lenders may be willing to exclude debts with less than a year remaining or that you can prove someone else is responsible for. Payment figures are totaled to figure out total monthly obligations.
Lenders compare the monthly income to debt to calculate the income versus debt ratio, which must stay under a certain amount. Furthermore, mortgage payments and your monthly debt should remain under a certain percentage for loan approval. The specific percentage varies for each lender and for each program.
For instance, a lenders might allow 28 percent for mortgage payments and 40 percent for cumulative debt.. Based on these figures, an individual earning 60,000 annually (5,000 monthly) would be allowed up to a 1,400 monthly mortgage payment and permitted 2,000 per month for all debts.
Note that this is only an example and considers only one part of the financial evaluation that may be completed. There are additional considerations, such as FICO history and program specific requirements. It is critical to work with a knowledgable mortgage company for information on income versus debt ratio for Washington financing pre-approvals specific to your particular qualifications.