Fannie Mae, Freddie Mac, FHA, and VA all qualify mortgage borrowers by using their gross income. You would think they would use net income (after tax income) since a mortgage payment is paid out of after tax income, but they use gross income. I am sure if they suddenly shifted the guidelines to using net income to qualify mortgage borrowers, the allowable debt ratios would go up to compensate for using the reduced after tax income.
In the mortgage world non-taxable income will be grossed up 125%. What this means is Read the rest of this entry »
When things drop there is usually trouble, like bombs, glassware, or your income. However, sometimes it is good when things drop, like interest rates, gas prices or your golf score. Speaking of dropping income, it is important to know that if you have any sort of variable income and it drops, it will hurt you in qualifying for a mortgage. What is Read the rest of this entry »
Many people ask about 15 year mortgages. Some people ask about a 15 year mortgage in relation to refinancing, and they figure with lower rates maybe they can afford a 15 year loan instead of a 30 year loan. And some people inquire about a 15 year loan when buying a home, because they want to pay off debt faster. But the monthly payments are quite a bit higher on a 15 year loan, and although you can save a lot of money over the long haul, you really have to decide what you can afford, and if cash flow is more important than building equity. You do get a lower rate on a 15 year mortgage, but Read the rest of this entry »