Other Income In Qualifying For Home Loan
Income, other income, liabilities, assets, and credit scores are the factors that determines whether you qualify and how much you qualify on a mortgage loan. The mortgage underwriter also will analyze your credit report and see your payment history and whether you have any public records and whether you meet Fannie Mae and FHA guidelines. Income and liabilities are used to determine your debt to income ratio and in the event your income cannot be documented, it can hurt your chances in getting qualified for a mortgage loan. Many self employed borrowers and those who receive cash income normally run into high debt to income ratio problems and need other income in order to meet the minimum debt to income ratio requirements.
Front End Debt To Income Ratios
Debt to income ratios are calculated as follows:
For front end debt to income ratios, also known as the housing debt to income ratios, it is the monthly principal, interest, property taxes, homeowners insurance, and homeowners association fee ( if applicable ) divided by the borrowers , or borrowers, total monthly gross income.
Back End Debt To Income Ratios
For back end debt to income ratios, it is the total monthly obligations such as monthly mortgage payments, automobile payments, student loan payments, installment loans, revolving minimum monthly payments, and minimum credit card monthly payments, divided by the total monthly gross income of the borrower, or borrowers. With FHA insured mortgage loans, the maximum front end debt to income ratios allowed is 46.9% and the maximum back end debt to income ratios allowed is 56.9%. For conventional loans, the debt to income ratios are much lower and it depends on how strong the borrowers are per the Automated Underwriting System.
Other Income To Qualify For Home Loan
Other income can be used to qualify for a residential mortgage loan and is allowed. For example, social security income can be used and most often can be grossed up by 25%. Pension income can also be used to qualify for a mortgage loan and if the recepient gets a net check, then pension income can also be grossed up by 25%.
Alimony And Child Support Income
Alimony and child support income can be used if and only if the alimony and child support will be continued for the next three years and you can provide documentation. Overtime income can be used if, and only if, the borrower has had continous overtime for the past two years and human resources can attest that future overtime is likely to continue. Royalty income can be counted towards income if the borrower can document that the royalty income will continue for the next three years. Part time job income can be counted as other income if the borrower has had the part time job for the past two years.
Gustan Cho NMLS ID # 873293