Gross Income Needed For Mortgage

Most lenders require the front end ratio to equal 28 percent or less although federal housing administration lenders may accept a front end ratio up to 31 percent.

Gross income needed for mortgage. For base pay bonus pay and commission income equaling less than 25 percent of the borrower s total annual employment income a completed request for verification of employment form 1005 or a. If you subtract the 2 500 from that amount you are left with. Use this mortgage income qualification calculator to determine the required income for the amount you want to borrow. These guidelines assume that your mortgage payments including taxes insurance association fees and pmi fha insurance should be no greater than 28 percent of your monthly gross income.

The monthly mortgage payment includes principle interest property taxes homeowner s insurance and any other fees that must be included. This is because 8 928 times 36 is 3 214 a month. In addition these guidelines assume that your mortgage payment and other monthly debt obligations combined should not exceed 36 percent of your monthly gross income. The housing expense or front end ratio is determined by the amount of your gross income used to pay your monthly mortgage payment.

For example if your piti equals. These costs are commonly referred to as piti which is derived from. 4x salary income needed 4 5x salary income needed 5x salary income needed 5 5x salary income needed 6x salary income needed 500 000. Pincipal interest tax insurance.

If you know your monthly mortgage payment is project to be 2 500 a month then you need to divide that by 28 to get the minimum gross monthly income you need to make to afford the payment which is 8 928. However at this annual income you will need to make sure that your other long term debt does not exceed 714 a month. Under this formula a person earning. At 4 5 your required annual income is 54 946 maximum monthly payment piti 1 198 37.

This equates to earning 107 136 a year before taxes. Generally speaking most prospective homeowners can afford to finance a property that costs between two and two and a half times their annual gross income.