Income Guidelines For Mortgage Approval

Also called a piti ratio principal taxes interest and insurance this number reflects your total housing debt in relation to your monthly income.

Income guidelines for mortgage approval. Requirements for pre approval. Borrowers with low debt to income ratios have a good chance of qualifying for low mortgage rates. Multiply your annual salary by 0 36 percent then divide the total by 12. Your likelihood to repay the loan.

There are a number of variables that determine what a borrower s dti should be. Most lenders want your debt to income ratio to be 36 or less but the ratio that works best for you is the one that you can comfortably afford. For cmhc insured mortgage loans the maximum purchase price or as improved property value must be below 1 000 000. Mortgage lenders calculate your mortgage eligiblity based on how much money you make before you take any tax deducations or pay taxes.

Your back end dti or total dti. You will typically have a minimum down payment starting at 5. Most lenders do not want your total debts including your mortgage to be more than 36 percent of your gross monthly income. If you take home 6 000 per month and are trying to buy a home that would require a 1 500 monthly payment your front end dti would be.

1 500 6 000 25 or 25 back end dti. There are many ways you may be self employed and underwriters look at each structure differently. Once you add in monthly payments on other debt the total shouldn t exceed 36 of your gross income. Of course the lower your debt to income ratio the better.

Lenders typically want no more than 28 of your gross i e before tax monthly income to go toward your housing expenses including your mortgage payment property taxes and insurance. For example fannie mae requires that a borrower s dti can t exceed 36 percent of their stable monthly income. Your payment history and credit score are indicators to lenders of your likelihood to make payments in the future. The ideal debt to income ratio for aspiring homeowners is at or below 36.

Determining your monthly mortgage payment based on your other debts is a bit more complicated. For a purchase price of 500 000 or less the minimum down payment is 5.