Income
is reviewed for a few different reasons.
Ability to repay the mortgage
Amount of Loan borrower can afford
Following are some of the most basic guidelines.
Two
years of work history in same field.
Income should be steady or increasing over two year period.
Also, the amount of "Gross Income" will determine the amount of loan
the borrower can qualify for by calculating "Ratios". These ratio's
are broken into two different categories:
Front End Ratio - Gross income divided
by PITI* mortgage payment.
Back End Ratio - Gross income divided by PITI* mortgage payment plus minim payment
of bills.
* PITI ~ prinicipal and interest loan payment (PI), plus monies collected
for taxes (T) and insurance (I)
The minimum monthly bills that are considered are the following:
Car Payments
Credit Card Payments
Loan Payments
Child Support, Alimony, Palimony Payments
The front end ratio should typically not exceed 28% of the gross income and
the back end ratio should not exceed 36% of gross income. These are only guidelines
and may be exceeded dependant on overall strength of file.