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.

Continue Reading

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:

    What is the definition of "full reconveyance?"

    A:

    Investopedia explains that "full reconveyance" occurs when a deed of reconveyance is issued by a mortgage holder, indicating that the borrower is released from his mortgage debt. Full reconveyance is issued when a borrower has fully pays the mortgage on a home.

    Full Answer >
    Filed Under:
  • Q:

    How do you qualify for a Fannie Mae loan program?

    A:

    To qualify for a Fannie Mae loan program as of 2015, a borrower should have a front-end debt-income-ratio of at most 28 percent, attain the required credit score and provide necessary financial information, as Investopedia explains. The borrower should deposit a certain down payment before applying for the mortgage.

    Full Answer >
    Filed Under:
  • Q:

    What is a deed of reconveyance?

    A:

    A deed of reconveyance is a transfer document issued to a mortgage borrower after clearing mortgage debt, according to Investopedia. The document transfers the property title from the lender to the borrower when the latter pays the mortgage in full.

    Full Answer >
    Filed Under:
  • Q:

    What is the skip-a-payment mortgage option?

    A:

    The skip-a-payment mortgage option is a mortgage program in which a lender permits a borrower to defer his mortgage payment due to financial problems, according to Investopedia. Though a rare program in the United States, it is common in nations such as Canada.

    Full Answer >
    Filed Under:

Explore