Personal finances play a big role in home loan pre-approvals. All finance companies evaluate your assets, income, credit and debts. These affect whether you can obtain a loan and for what amount. Below is information on income to debt ratio for Palm Beach FL financing pre-approvals.
Income Analysis
Lenders will look at your gross monthly income. This includes recurring income that can be documented. Salaries are the most common type of income. You will be required to present paperwork (such as W-2 forms) for the previous 2 years, giving them a sense of pattern. They may request explanations for any unusual items, such as fluctuations in earnings or inconsistent amounts. Alternate sources of income can include alimony, investments, and stocks. Any items that you attempt to report as income must have valid supporting paperwork. A history of earnings and possibility of continued earnings is naturally very helpful. The verification standard may vary among companies and certain exceptions may also be permitted. It is important to inform your mortgage consultant about all possible sources to figure out what can or cannot be used.
Understanding Debt
Debt describes all monthly obligations such as charge cards and installment loans. The specific payment amount on loans and other installment debt are used. For adjustable items like credit cards, minimum monthly payments are applied. These figures are normally noted in your credit report. Some companies may agree to ignore loans with less than one year remaining in payments or that you can prove someone else is responsible for. Payment amounts are totaled to determine total monthly debt.
Information On Income To Debt Ratio For Palm Beach FL Financing Pre-approvals
Lenders compare the calculated income to debt for the income to debt ratio, which must remain under a certain level. Additionally, mortgage payments and your monthly debt must also stay within a specific percentage for loan approval. The particular percentage can vary from lender to lender and based on the program as well.
For instance, some companies may limit your monthly mortgage payment (principal, interest, property taxes, and hazard insurance) not to exceed 28% of your monthly income. They might also limit your total debt to no more than 40% of monthly income. Based on these figures, a borrower making 60,000 annually (5,000 monthly) would be allowed up to a 1,400 per month mortgage payment and 2,000 per month in combined debt. Bear in mind that this is strictly an example and includes only one part of the financial analysis that can be performed. There are additional factors, such as credit history and loan program specifications. It is important to consult with a local loan advisor for information on income to debt ratio for Palm Beach FL financing pre-approvals for your personal situation.
