Do I Qualify for a Loan? Here is the Simple Math!

Dated: 02/21/2020

Views: 144

Income Requirements for Conventional Mortgage Explained

 
A conventional mortgage is a mortgage that's not backed by a government secured entity. Lenders for conventional loans are banks or financial institutions that fund mortgages and hold the loan or sell it off to investors after a period of time. Income requirements for conventional mortgages are also known as debt-to-income ratios (DTI) with the golden rule of 30% debt-to-income for repayment. Multiple factors come into play when it comes to getting a conventional mortgage and determining income requirements. Here's a look at them. 

Take all of your bills every month and total them into one amount. Subtract that total from your gross monthly income to determine how much cash you have left over that's not spoken for. The remaining gross monthly income shows you your DTI. For example: your bills total $2,200 a month and your monthly income is $7,000. After paying your bills, you're left with $4,800 each month. This puts you at a 31% debt-to-income ratio, which is what lenders like to see as you can easily handle insurance and taxes. The lower your DTI, the better your mortgage terms, whereas the opposite is true of a higher DTI. 

DTI is just one part of determining income requirements. You may have a low DTI, but if your down payment and income aren't sufficient to cover the monthly mortgage, you're not likely to be approved for the home you want to buy. Let's take a look: the home you want is $100,000 and you have $5,000 to put down. That leaves you with a $307 monthly payment. But if you make $1,000 a month and have $600 in monthly bills, you're left with $400 for the mortgage, taxes, and insurance. You're not left with enough money to pay incidentals and are a poor risk for the lender.

Source: Bankrate, LLC
Wayne Gaddy 843-603-5552 If you are thinking of looking for a new home; I can help you find the best lender for your financial situation.
Call today and lets get started.
Blog author image

Wayne Gaddy

Local Real Estate Broker/REALTORĀ® representing Sellers and Buyers with Residential Homes, Condos, Vacation Homes, New Homes, Land and Investment Property since 2003. I would be honored to have an op....

Latest Blog Posts

Are you considering using an FHA mortgage to purchase your first home?

If so, see what you need to know in the comprehensive article...What is an FHA Mortgage?Over my twenty years of selling real estate, many homebuyers have asked me what an FHA mortgage is and how do

Read More

What is mortgage forbearance?

As the coronavirus began sweeping through the country in March, many states issued shut-down orders for businesses, putting as many as 40 million people out of work by May. On March 27,

Read More

Garden City Beach - Marlin Quay NEW MARINA STORE & Restaurant COMING SOON

Take a look at the proposed Architechtural Renderings of the Brand New Marlin Quay Marina Store and Restaurant and the current progress now under construction. This exculsive area of Garden City

Read More

Announcing Our New digital platform for - Virtual Tour Showings

In the midst of this crazy and uncertain time we are excited to announce the debut of our virtual home tours. As we navagatie a new way of life we view it as our duty, our privilege , and

Read More