Q:

When applying for a mortgage, do they look at net or gross income?

A:

Quick Answer

In evaluating a borrower's application, mortgage lenders use gross income to calculate debt-to-income ratios, according to Investopedia. The general rule of thumb is that a borrower shouldn't have debt obligations that exceed 36 percent of monthly gross income.

Know More

Full Answer

If a borrower makes $4,000 gross per month, the maximum debt of that borrower under the 36 percent guideline is around $1,440. Some lenders exceed this threshold based on other application factors. Even though lenders use gross pay, Investopedia points out that borrowers need to consider their actual take-home pay when deciding whether they can afford to make a certain mortgage payment.

Learn more about Credit & Lending
Sources:

Related Questions

  • Q:

    How do you refinance your mortgage?

    A:

    To refinance your mortgage, locate a lender with services that match your financial goals, and upon identifying the lender, complete an application, which requires current income statements, home value, credit scores, current debts and desired loan amount. Upon acceptance, review and agree to loan terms.

    Full Answer >
    Filed Under:
  • Q:

    How do you get a mortgage loan?

    A:

    To obtain a mortgage loan, locate a loan lender, complete an application and provide the lender with necessary documentation. After reviewing and accepting your application, an interest rate and final loan amount is offered.

    Full Answer >
    Filed Under:
  • Q:

    How can I get a mortgage on low income?

    A:

    A person can get a mortgage with a low income by applying for a Federal Housing Administration loan, according to SFGate. Those looking for an FHA loan can get information from the Department of Housing and Urban Development. Applicants should research the lowest mortgage rates before applying for the loan.

    Full Answer >
    Filed Under:
  • Q:

    What do mortgage underwriters look for?

    A:

    A mortgage underwriter looks for potential issues that may prevent a borrower from making his house payment. They investigate application information, evaluate the property to ensure the transaction is financially practical, and verify funds involved in the mortgage transaction.

    Full Answer >
    Filed Under:

Explore