Refinance Mortgage Income Information
A lot has changed in the past year regarding the qualification standards for a refinance mortgage loan, and one of the biggest changes relates to income. In prior years, as long as a borrower had a decent credit score, they could qualify for a refinance mortgage by simply stating their income on the home loan application. Now things are a bit different. No documentation, low documentation, and stated income loans have been taken off the table by mortgage lenders in an effort to limit risk on their part. Today, a refinancing homeowner must fully document their income, which has had a negative impact on self-employed individuals. For self-employment, the income used by refinance lenders to qualify your debt-to-income ratio is the bottom line income figure, after deductions for tax purposes. This, of course leads a significant portion of self-employed people out in the cold because after deductions, their income does not qualify them for a new refinance mortgage.
As long as the borrower’s credit rating is in decent shape, most refinancing lenders will allow a debt-to-income ratio, or DTI, at up to 50 percent for refinance home loan qualification purposes. This means that the homeowner’s new proposed monthly principle, interest, property taxes, insurance, and monthly household expenses cannot be more than 50 percent of their gross monthly income. So, if you make $5,000 per month in gross income, your total of the previous listed items cannot exceed $2,500 per month.
A good bit of news for those consolidating their bills and credit cards with their new refinance mortgage is that for each bill you consolidate, that item is taken off of your DTI and can mean the difference between approval and rejection for your new mortgage. A debt consolidation refinance will also lighten your budget on a monthly basis.
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