To know the loan amount a home buyer is able to borrow, the lender must know the gross annual income or income before taxes and deductions are subtracted. The loan amount will be decreased if there is long term debt which is debt that will not be paid off within the next 12 months. Home loan requirements will not allow long term debt including the house payment to exceed a certain percentage of gross income. Realtors and home loan agents know which percentages are allowed with certain types of loans. If there is no long term debt other than the house payment, the house payment can be a larger percentage of gross income. Credit rating and job stability are also an important criteria that a lender will consider… but ultimately loan approvals will have to conform to certain mathematical formulas.
It is important to understand how to calculate gross annual income. An experienced Realtor like Jillian Batchelor can be very helping to determine this calculation. Many people do not really know what their gross annual income is because they get paid every week or every two weeks and might believe that the annual income is 4 weeks of pay times 12 months which translates into only 48 weeks per year instead of the actual 52 weeks. The additional 4 weeks of income may mean a larger loan amount which would open the door to a higher priced home or offset some long term debt such as a car payment or student loan.
The benefit of combined income also translates into more home buying power. Just remember, any income used for home loan qualification must also accompany the required credit reports and job stability. Combined incomes used to purchase homes are not only for couples. Combined incomes used for home loans can be used by any combination of adults who wish to pool resources and purchase a home together. Nowadays, extended family members and close friends frequently up their buying power by becoming co-borrowers and buying one larger home. All types of income that is stable and long term can be used to qualify for a home loan including child support and social security. Of course, all parties using income to qualify must be on the deed and have acceptable credit.
Combining incomes to increase real estate buying power often frees buyers to look at larger and more expensive homes. The Batchelor Group has many years of experience helping home buyers understand their full potential. Call or email the Batchelor Group today to find out your real estate purchasing power.