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Lenders use a term known as debt to income ratios. They use two of them. One is known as a front end ratio. <br />
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For any income determinants the mortgage company uses you gross income.<br />
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For FHA loans lenders like to see the ratio of the monthly payment of the house, including taxes and insurance, not exceeding 29% of your monthly gross income.<br />
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A thirty-three percent front end ratio is generally used as a basis for conventional loans.<br />
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Now that we have discussed the front end ratio we must now tack the back end. You must qualify for both.<br />
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Determining the backend ratio is similar to the front end except one must add to the house payment to all other monthly payments made to creditors. This total amount in relation to the gross income is your figure.<br />
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For FHA this ratio is best not to exceed 41%. For conventional loans it is 38%.<br />
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Where you can get into a little trouble in determining these ratios is factoring the proper income. Factoring monthly debt is a piece of cake comparatively.<br />
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A lucky few are fortunate enough to be on a monthly salary. You can count on that to come in and so can a lender. For others it is more difficult to determine.<br />
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It runs the gambit from construction workers who make money based upon the economic environment, to hourly workers, to commissioned based folks who write off everything under the sun on their returns.<br />
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Others work part time, and you can add many etc's here.<br />
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If you have odd ball income.. That means you Mr. Self employed or commission guy, you should use your two most recent tax returns as a basis. Take the adjusted gross income and average for twenty four months.<br />
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It is a shame that mortgage companies require the use of tax returns like that. We all know you make quite a bit more money than what is shown. <br />
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If your situation didn't fit in my explanation bite the bullet and call a loan officer. Otherwise you can use this info as a rule of thumb.</div><div class='uawresource'><div style='font-style:italic;' class='uawabout'><br />
About the Author:<br />
</div><div class='uawlinks'>Discover your payments in <a href="http://www.austinmortgagefolks.com">Austin. Go to a mortgage refinance calculator.</a> </div><br />
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