Jim Eaton – Blueprint Realty, Inc.

Introduction To Income Vs. Debt Ratio For Franklin TN Financing Pre-approvals

Financial information plays a large role in home loan pre-approvals. All mortgage companies evaluate your assets, income, credit and debts. These affect if you can obtain a loan and how much of a loan you can obtain. The following is introduction to income vs. debt ratio for Franklin TN financing pre-approvals.

Introduction To Income Vs. Debt Ratio For Franklin TN Financing Pre-approvals

Income Analysis

Mortgage companies will look at your total income each month. This includes only items that may be verified. Salaries are the most common income source. You will be asked to furnish paperwork (such as tax forms) for the previous several years, which gives them a sense of consistency. They may inquire about any atypical items, such as fluctuations in salaries. Alternate income sources may include alimony, investments, and stocks. Anything that you would like considered must have acceptable documentation. A history of earnings and potential for continued income can be very helpful. The amount of documentation needed will vary among mortgage companies and certain exceptions can also be permitted. It is important to tell your loan consultant about all potential income sources to determine what does or does not qualify.

What Counts as Debt

Debt includes all current expenses such as credit card payments and loans. The exact payment amount on loans and other structured debt are taken into account. For adjustable debt like credit cards, minimum monthly payments are applied. These figures are usually available on your credit report. Many lenders will agree to exclude debts with under one year before the payoff date or that you can prove another individual has been paying for. The figures are totaled to determine total monthly debt.

Introduction To Income Vs. Debt Ratio For Franklin TN Financing Pre-approvals

Mortgage companies compare the monthly income to debt and calculate the income vs. debt ratio, which must stay under certain limits. Furthermore, mortgage payments combined with your total debt must also remain under a certain percentage for loan approval. The exact benchmark varies from one company to another and for each program.

Sample Calculations

For instance, a mortgage company may permit up to 28 percent for mortgage payments and up to 40 percent for combined debt.. Using these sample figures, a borrower earning $60,000 per year ($5,000 monthly) would be allowed up to a $1,400 per month mortgage payment and permitted $2,000 per month for combined debts.

Keep in mind that this is strictly an example and includes only one part of the financial review that can be completed. There are many other considerations, such as credit score and program specific criteria. It is critical to contact a knowledgable mortgage company for full details on income vs. debt ratio for Franklin TN financing pre-approvals specific to your particular situation.


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Jim Eaton - Blueprint Realty, Inc.