What is a housing-to-income ratio?
(back to top) Your income, debt, and mortgage payments are the primary factors that affect whether you qualify for a loan. If you do qualify for a loan, you can apply, and a lender will move to the next step of checking to see if you can be approved. To determine your qualification, the first thing a lender will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your housing-to-income ratio. If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your debt-to-income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan. The limits within which your housing and debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the loan-to-value ratio, or LTV). This loan-to-value ratio is one of the most important factors in determining a
This ratio is used to get a rough idea of how much of your gross monthly income is being used by your total housing expense. The first thing Lenders Direct will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your housing-to-income ratio. We use this number to find the best loan program to meet your individual goals. Since we are a full service bank we have many programs that will allows for a much higher than usual ratio. Lenders Direct can even offer loans that allow you to “state ” your income. These loans are very helpful if your income is difficult to prove by traditional methods, like self-employed borrowers. Back to top ยป What is an appraisal and who completes it? The appraisal determines the value of the property in question, which becomes a prime factor in determining the loan-to-value — or LTV — ratio (the amount of your loan divided by the value of your property). Your LTV is important because it determines your equity in
Your income, debt, and mortgage payments are the primary factors that affect whether you qualify for a loan. If you do qualify for a loan, you can apply, and the lender will move to the next step of checking to see if you can be approved. To determine your qualification, the first thing the lender will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your housing-to-income ratio. If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your debt-to-income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan. The limits within which your housing and debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the loan-to-value ratio, or LTV). This loan-to-value ratio is one of the most important factors in determining a home loan.
