Calculating a Debt-to-Income Ratio in a Loan Modification
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Loan Modifications are becoming popular. A loan modification helps people save their houses by decreasing the payment in the loan. However, not every individual who applies for a loan modification gets one.
Lending institutions go over each individual application to see if the owner will be able to pay back the loan after the mortgage. Banks generally take a look at the debt-to-income ratio to know if the home owner will be able to pay back the mortgage. In this essay, well look at how to figure out this ratio for a loan modification.
First, you should add up all of your gross income. the gross income is the money you make prior to discounting your taxes. If you get child support or alimony, you can add these amounts.
After adding up all of your gross income, you should add all of your monthly debt obligations. This includes the minimum payments on your credit cards, car installments, the desired new mortgage payment, property taxes and home insurance. In this amount, do not add utilities, cable TV, food, etc.
After you have figured out your recurring debt payments, with the addition of the new mortgage payment, you should multiply this number by two.
To find out if you have a very good chance to get approved for the mortgage modification, your doubled number needs to less than your gross monthly income. If the amount is over the gross income, there is a decent chance that you won't be approved for the modification.
Keep in mind that banks are usually willing to modify a mortgage when the debt-to-income ratio is under 50% of your gross monthly income. A few banks will go up to 55%. Nevertheless, most of the lenders won't allow any more than that percentage.
Nevertheless, you may sometimes be given a loan modification if you have a special situation. For instance, you may have been sick and now that you feel better you can work again in a good job.
Please, keep in mind that this way to calculate the ratio is only used as an example. It is up to you to discuss your situation with a loan modification expert who may help you present your situation in a better light or even offer you recommendations on how to change the debt-to-income ratio so that the loan modification is approved by the lender.
Lending institutions go over each individual application to see if the owner will be able to pay back the loan after the mortgage. Banks generally take a look at the debt-to-income ratio to know if the home owner will be able to pay back the mortgage. In this essay, well look at how to figure out this ratio for a loan modification.
First, you should add up all of your gross income. the gross income is the money you make prior to discounting your taxes. If you get child support or alimony, you can add these amounts.
After adding up all of your gross income, you should add all of your monthly debt obligations. This includes the minimum payments on your credit cards, car installments, the desired new mortgage payment, property taxes and home insurance. In this amount, do not add utilities, cable TV, food, etc.
After you have figured out your recurring debt payments, with the addition of the new mortgage payment, you should multiply this number by two.
To find out if you have a very good chance to get approved for the mortgage modification, your doubled number needs to less than your gross monthly income. If the amount is over the gross income, there is a decent chance that you won't be approved for the modification.
Keep in mind that banks are usually willing to modify a mortgage when the debt-to-income ratio is under 50% of your gross monthly income. A few banks will go up to 55%. Nevertheless, most of the lenders won't allow any more than that percentage.
Nevertheless, you may sometimes be given a loan modification if you have a special situation. For instance, you may have been sick and now that you feel better you can work again in a good job.
Please, keep in mind that this way to calculate the ratio is only used as an example. It is up to you to discuss your situation with a loan modification expert who may help you present your situation in a better light or even offer you recommendations on how to change the debt-to-income ratio so that the loan modification is approved by the lender.
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