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You are here: Home / Real Estate / Information On Income Vs. Debt Ratio For Grand Rapids Michigan Mortgage Pre-approvals

Information On Income Vs. Debt Ratio For Grand Rapids Michigan Mortgage Pre-approvals

July 27, 2015 By John Doorn, Realtor

Personal finances play a significant role in loan pre-approvals. All finance companies evaluate your assets, income, credit and debts. These determine if you may get a loan and for what amount. This article offers information on income vs. debt ratio for Grand Rapids Michigan mortgage pre-approvals.

Evaluating Income

Mortgage companies will calculate your gross earnings per month. This includes recurring items that may be confirmed. Earnings from work are the most common income form. You will be asked to furnish paperwork (such as tax filings) for the previous several years, which tells them how stable your income may be. They might inquire about any strange items, such as fluctuations in salaries. Alternate income types can include alimony, investment properties, and stocks. Any items that you would like considered must be verifiable. A history of earnings and potential for continued earnings can be important. The type of documentation required can differ among mortgage companies and some exceptions can also apply. It is important to notify your mortgage advisor about all potential income sources to know what can or cannot be used.

Calculating Debt

Debt includes all monthly obligations such as charge cards and personal loans. The exact payment amount on loans and other fixed-payment debt are used. For revolving items like credit cards, minimum monthly amounts are used. These figures are typically visible on your credit report. Many companies will agree to exclude debts with less than a year left or that you may prove someone else is responsible for. The amounts are combined to calculate total monthly obligations.

Information On Income Vs. Debt Ratio For Grand Rapids Michigan Mortgage Pre-approvals

Mortgage companies compare the calculated income to debt calculate the income vs. debt ratio, which must fall within a particular level. Additionally, mortgage payments and your total debt should stay under a specific percentage in order for your loan to be approved. The particular percentage varies among mortgage companies and contingent upon the program as well.

Sample Calculations

For instance, some lenders may require the monthly mortgage payment (principal, interest, taxes, and homeowners insurance) not to exceed 28 percent of your monthly income. They might also not allow total debt to be greater than 40 percent of total income. Using these sample figures, an individual earning 60,000 annually (5,000 monthly) would be approved for a 1,400 per month mortgage payment and allowed 2,000 each month for combined debt.

Remember that this is only an example and considers only one part of the financial review that can be performed. There are additional factors, such as credit rating and loan program requirements. It is critical to consult with a knowledgable mortgage company for information on income vs. debt ratio for Grand Rapids Michigan mortgage pre-approvals specific to your particular finances.

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Filed Under: Real Estate Tagged With: Grand Rapids Michigan, income, debt, pre-approvals, ratios


John Doorn, Realtor

JH Realty Partners
545 Ada Drive SE
Ada, MI 49301
616-682-2820 office
616-292-7951 direct
johndoorn@grar.com
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