There
are many factors that go into the approval of a mortgage. They range from
how long you've been at your job to how many credit cards you have. The
most important
thing a lender is looking for is your
ability to pay your mortgage on time and in full.
This ability to pay is based on your
income and debt levels. The lender will look at your housing ratio and the
total obligation ratio.
These are very simple ratios that
say how much debt you can afford. Your housing ratio is the percentage of
your gross monthly income that will be spent on housing expenses in your
new home. This includes mortgage payments, taxes, insurance and
maintenance. The lender is looking for a ratio of 28% or lower.
The total obligation ratio is the
percentage of your income that goes to both your housing expenses and any
other debts, including credit cards, car loans and child support. The
lender wants to see a ratio of 36% or lower. You can sometimes negotiate
for higher ratios based on your individual circumstances.
