March 4th, 2018 11:36 AM by Jackie A. Graves, President
lenders look for two main things when reviewing loan applications: borrowers’
willingness to pay back the loan (typically determined by their credit
score) and their ability to pay it back. The latter is gauged by proof
if you have impeccable credit, you still have to prove that your income is
enough to cover the loan.
there’s a range of loans, from government-assisted loans to conventional
fixed-rate loans, designed for people with various financial needs.
not limited to one type of borrower,” says Houtan Hormozian, vice president at
Crestico Inc. “There’s no standard when it comes to someone’s income. There are
some college graduates who qualify for a loan with just one pay stub.”
there are some basic standards that borrowers should be aware of before they
start shopping for a mortgage.
and Freddie minimum income guidelines
mortgage lenders follow Fannie Mae and
Freddie Mac guidelines when underwriting loans.
and Freddie’s list of acceptable income documentation is extensive, but
it isn’t set in stone. For example, if you have a relationship with a
bank that knows your history and thinks you’re good for a loan, you
might be able to secure a mortgage without meeting every standard requirement.
Federal Credit Union is an example of an institution that considers a
customer’s relationship with the institution. “We’re open to considering loans
for customers who might not meet normal standards,” says Randy Hopper, senior
vice president of mortgage lending at Navy Federal.
are also borrower programs that deviate from standard income requirements.
example, FHA loans have no specific income requirements.
For these loans, lenders look at how much income is eaten up by monthly
bills and debt, as well as your employment track record. Salary – in terms
of dollars earned – doesn’t play a big role in FHA loans.
reporting income from second jobs will have to provide tax documents to
support that claim. Those who are self-employed must show proper tax
documents and complete Fannie Mae’s Cash Flow Analysis or one that uses a
similar set of measures.
Mae lists 26 non-employment
income types as acceptable forms of income. The borrower must
supply the required documentation to support these income claims. These
income types are an important consideration because the more funds you
have coming in, the more likely you are to qualify, assuming that your credit
score and debt-to-income ratio meet the standards.
sources of income that lenders may consider include alimony, boarder income,
royalty income, Schedule K-1, foster care income, trust income and Social
Security payments, to name a few.
the income requirements, the requirements for a borrower’s debt-to-income ratio, or DTI, are not set
in stone, according to Fannie Mae’s
guidelines. There are a number of variables that determine what a
borrower’s DTI should be. For example, Fannie Mae requires that a borrower’s
DTI can’t exceed 36 percent of their stable monthly income. However, that
maximum can go up to 45 percent if the borrower meets the credit score and
recommends paying off as much debt as possible to optimize your DTI.
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