Income calculation help - myFICO® Forums - 4267920

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Hello everyone. Can anyone tell me how lenders calculate income to determine loan amount?

For example if I make $31200 a year from employment plus $9600 child support a year but my tax return only show $28000 employment will they use the $28000? Will they not take into consideration maternity leave or time off for being sick? I was hoping to qualify for $2000k but the calculators all say $135k. If so home buying is out of the question for me unless I find another job.

Message 1 of 14

13 REPLIES 13

Do a calculation of what a payment on a 200k house would be, if putting less than 20% down make sure you add PMI to the monthly payment and homeowners insurance/yearly taxes. Depending on the lender you use they will have a maximum front and and back end DTI. My lenders max back end DTI is 45%. Add all of your monthly payments up ie: loans, minimum credit card payments etc (stuff on your credit), then add in the estimated monthly house payment and divide that number by your monthly gross income, that will be your DTI.

Don’t take your credit for granted, use it with care! These days, catch me in the bankruptcy forum!?

Message 2 of 14

Principal and interest alone on a 30 year 200k loan at 3.875% rate would be $940. What other monthly debts do you have and I can help you calculate based on DTI what you would qualify for.

Don’t take your credit for granted, use it with care! These days, catch me in the bankruptcy forum!?

Message 3 of 14

I have a $452 car note and $50 student loan. I have 2 cc but I pay them off in full before the statement cuts. Both are 300 limits.

Message 4 of 14

Okay, so using the calculation of your CS and employment I get $3400 a month as your income pre tax. This is how I broke down your loan:

Principal and interest @3.875%=$940
Mortgage insurance for less that 20% down-$141
Homeowners insurance-$85
Taxes-$250
Using those calculations I get a back end DTI ratio of around 56%. Your payment to income DTI is around 42%, that's just on the house which I think may be a deal breaker. I believe they only allow around 32% there.

My estimates are rough, assuming taxes would be around 3k a year and that your homeowners insurance would only run $85 a month, they could be higher.

FHA allows a backend DTI of of 43% I believe, but it can be pushed as high as 60% if you have strong factors such as large down payment etc etc. Some lenders have there own overlays and only allow so much. Also if your score is less than a 620 I believe it has to be manually underwritten but maybe someone can chime in on that. With my calculations your payment would run around $1,415 a month.

Don’t take your credit for granted, use it with care! These days, catch me in the bankruptcy forum!?

Message 5 of 14

@cartwrna wrote:
Okay, so using the calculation of your CS and employment I get $3400 a month as your income pre tax. This is how I broke down your loan:

@Principal and interest @3.875%=$940
Mortgage insurance for less that 20% down-$141
Homeowners insurance-$85
Taxes-$250
Using those calculations I get a back end DTI ratio of around 56%. Your payment to income DTI is around 42%, that's just on the house which I think may be a deal breaker. I believe they only allow around 32% there.

My estimates are rough, assuming taxes would be around 3k a year and that your homeowners insurance would only run $85 a month, they could be higher.

FHA allows a backend DTI of of 43% I believe, but it can be pushed as high as 60% if you have strong factors such as large down payment etc etc. Some lenders have there own overlays and only allow so much. Also if your score is less than a 620 I believe it has to be manually underwritten but maybe someone can chime in on that. With my calculations your payment would run around $1,415 a month.

Thank you cartwrna. So with FHAs DTI and my income the calculators are right about 134k loan. I will never find anything in that range here in So Cal. This is hopeless unless I find another job or save for a few more years.

Message 6 of 14

Hopefully a mortgage banker will chime in shortly, they can help you figure an exact price range.

Don’t take your credit for granted, use it with care! These days, catch me in the bankruptcy forum!?

Message 7 of 14

I'm in Iowa, so 134k gets you a pretty decent house LOL. 200k and your living good :-p

Don’t take your credit for granted, use it with care! These days, catch me in the bankruptcy forum!?

Message 8 of 14

I'm in Alabama. $100k will get you a solid 3/1 starter house. $135k will usually get you a nice house. $200k will easily get you a house with a lot of upgrades & either a large lot or a small amount acreage.

Message 9 of 14

I'm in Nebraska - and looking at a 4/2 house - with a huge yard - that is about $100K even - in Omaha (whohoo the big city)

It all depends on where you are at!

Message 10 of 14