CultureHome BuyingInvestmentNewsRefiStoriesSweet tips

Quit assuming you don’t earn enough to get a home loan.

Quit assuming you don’t earn enough to get a home loan.

Geez, you’re hard on yourself — it’s time to tell that little voice in your head to pipe down. Find out exactly how your income affects your chances of getting a home loan, and how you can improve your situation. 

Your income... what you THINK we’re looking for vs. what we’re ACTUALLY looking for.

Spoiler alert: we don’t actually get off on judging you. We don’t see what you make and call our co-workers over to gather around the computer to laugh and say things like ‘Ha! I think he missed a zero!’. That’s gross. 

We want you to succeed (it’s mutually beneficial, afterall) so we’re always looking for ways to get you into your dream place. As a rule, we actually find that far more productive than making fun of you. 

So, what ARE we looking for when it comes to income?  

Put simply — consistency and duration. 

Once again for the people up the back — consistency and duration (NOT ‘how much you earn’). 

So, basically we’re looking for 2 years’ worth of W2s and tax returns. We’ll also take a look at your pay stubs from your most recent month of work. 

Now allow us to stop you mid-eyeroll. You don’t need to waste time digging around in your inbox, or worse still, your Mom’s attic for this stuff — we link directly to your payroll provider and tax agent to grab it all. In like, 2 minutes flat. 

So, once we’ve got your income, what do we do with it? We introduce it to your debt.

You see, it’s the relationship between your income and your debt that actually helps us understand how you’re looking for a home loan. 

It’s called your DTI (debt-to-income ratio), and we use it to figure out if you’d be financially comfortable paying back a loan. So to figure it out, we take your monthly debt, divide it by your gross income and multiply it by 100 to get a percentage. 

As a general rule, anything under 36% is considered pretty good and most lenders would be happy with that.  

If your DTI is looking a little shaky, know this — we can go up to 45% on a conventional loan, as long as your credit score and savings check out. 

Now, wait — before you resort to busking Bon Jovi covers for extra cash….

Let us show you how to improve your chances of getting a loan without actually increasing your income. 

This is the part where most other lenders would shrug their shoulders and tell you to come back when you’re making more money. Jerks. 

Not us — we can’t bear the thought of you in a Jon Bon Jovi mullet wig, so check out these nifty ideas to boost your chances of getting into your own place. 

> FHA loans: these loans are issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). They’re perfect for low-to-moderate income borrowers — they require a much lower down payment (as little as 3.5%) and credit score, plus you can go all the way up to 50% DTI. You’ll find all the details here. 

> Low down payment conventional loans: Why should those FHAers have all the fun? There are also low down payment conventional loan options — 3% low to be exact. FannieMae and FreddieMac offer the ‘HomeReady’ and ‘HomePossible’ loan programs, and as their names suggest, they’re geared towards making it easier for people (especially first-timers) to get into their own place.  

To take advantage of the 3% goodness, you’ll need a credit score of between 620 and 640, that ‘consistent’ income we mentioned earlier and ideally a DTI below 43%.  

And unlike an FHA loan, you’ll be able to remove your mortgage insurance once you’ve paid enough down on your loan. You’ll also need to meet some income requirements. 

> Gifts: if you haven’t already, you may want to consider asking someone for a monetary gift towards your down payment. Who that ‘someone’ is depends on the type of loan you’re after. For conventional loans, you can only get a gift from a loved one but for FHA and USDA loans, that extends to employers, charitable orgs, labor unions and beyond. 

> Grants: there are literally hundreds of first-time homebuyer grants available all across the US. The specifics vary from state to state so the US. Department of Housing Urban Development is a great place to start for all the details. We’ve actually dedicated an entire blog to these tasty little enablers over here, so jump in there for a deep dive into gifts and grants. 

Now, can we have a word with your inner naysayer for a sec?

Hey Grumpy Kurt, quit busting Regular Kurt’s balls about what he earns — he’s got his Mom for that. We’ve just given you a bunch of reasons and ways he can absolutely give this home ownership thing a go — so pipe down or, get used to living in Kurt’s cousin’s trailer. 

If you loved Kurt, you’d at least click here and let him find out if he has a chance of getting a home loan. 

And in about 15 minutes, he’ll know exactly how much he can borrow and have an idea of his actual rate — then you can get back to hassling him about his questionable facial hair.  

Picking up what we're putting down?

You're just a cruisy 15 minutes away from knowing exactly where you stand.