When it comes to qualifying for a loan the most prominent thing you hear about is debt-to-income ratio. Well what does that mean anyway? Most often it is the sum of the monthly payment on the new mortgage, plus property taxes, homeowners insurance and other debt payments (Debt payments that extend beyond the next six months ,credit card debt, student loans, and alimony and child support payments, etc.), divided by income. The maximum debt-to-income ratio ranges from 40 percent to 43 percent, but underwriters can use discretion to accept higher requirements.
So how could you get underwriters to accept a higher percent? Well there are ways to make your existing income count for more. Claim pay above your base pay, investment returns, or any extra income.
- If you work overtime, receive a commission, or have bonus incentives, document that you have received it for two years, along with a statement from your employer that it will likely continue.
- If you have any part-time income that could be counted.
- If you have investment income that you believe to be stable, put your reasons in writing along with data on investment performance.
- If you are in the military and want to claim pay above base pay for your rank (jump, hazard, special assignment, etc.), and/or housing, base and food allowances, provide an explanation of why they will continue. If you are deployed, explain in writing that your pay stubs do not match your W-2s because you have been deployed to a war zone and that your income is not taxed.
- If your income has recently increased, obtain a written statement from your employer explaining the reason for the increase and that it is likely to continue.
- If your income has recently decreased, obtain a written statement from your employer explaining the reason for the decrease and why it is likely to be temporary.
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