by 
The Curious Bag
-
If you have enough money stashed away to pay cash for a home, there is no income limitation because you've paid the money up front. However, most potential homeowners have to take out a mortgage in order to buy a home, and they need to demonstrate to lenders that they have the income to pay back the money. Lenders will also consider your credit score and job stability when deciding whether to offer you a mortgage.
Income Ratios
When lenders consider your application for a loan, one of the major factors they will consider is how your monthly income compares with your expected mortgage payment. This is known as the front-end ratio, and it is calculated by dividing your monthly mortgage payment by your monthly income. For conventional mortgages, the ratio cannot exceed 28 percent. For FHA loans, lenders will allow the mortgage payment to take up to 29 percent of your income.
Pre-Existing Debt
If you have other debt payments that you are responsible for making, lenders will use an additional ratio to make sure that you are able to meet all of your debt all of your debt obligations. The calculation is known as the back-end ratio and is equal to all of your monthly debt payments including your mortgage divided by your monthly income. For conventional mortgages, lenders expect the ratio to be below 36 percent and for FHA mortgages some lenders will allow your ratio to go up to 41 percent.
Source:
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC