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

Dated: February 21 2020

Views: 179

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

The Importance of Home Equity in Building Wealth

Homeownership has always been the first rung on the ladder leading to household wealth. As Freddie Mac recently posted:   Homeownership has cemented its role as part of the

Read More

January 2021 Myrtle Beach Home Price Update

Friends and Clients —The real estate market continues to surge ahead. However, clouds might be forming on the horizon for sellers. Let me give you the details:1. Record-low inventoryThere were

Read More

LESSONS LEARNED FROM THE 2020 REAL ESTATE MARKET

THESE WERE THE BIGGEST LESSONS LEARNED FROM THE 2020 REAL ESTATE MARKETThere were many lessons learned in 2020. For example, there is no such thing as toomuch toilet paper.While there were a

Read More

Selling your house is the Right Move, Right Now.

Some HighlightsDemand from homebuyers has skyrocketed this year, which means today’s sellers are poised to win big. This ideal moment in time to sell your house won’t last

Read More