Income Documentation - NINA, also referred to as No Income No Asset, loans are mortgage loans in which No income and No assets are listed on your resdiential home loan application, also called a 1003. There will generally be a small rate adjustment made to the interest rate due to the higher risk to the lender for allowing this type of income documentation. A verification of employment will still need to be conducted to verify your job history and length of time on this current job.SIVA is a loan program in which the lender allows you to state your income on the 1003 without verifying with pay stubs and tax returns. You will be required to verify your assets that you have included on your 1003 application. The SIVA loan requires verification of employment, but not income.
A true No Doc loan will not require you to verify your income and assets. You will also not be required to verify your employment history, rental history, and any other thing that is normally required of you when obtaining a new mortgage. Credit score requirements are higher on these types of loans, because of the risk involved for the lender. You will also be subject to a slightly higher interest rate with these loans, also do to the risk factor.
A No Ratio loan is a loan where the debt to income ratio is not calculated because the borrowers income is not stated. The debt to income ratio is one of the determining factors for a loan approval.
You calculate the debt to loan ratio by dividing your total monthly payments by your total monthly pre-tax income. If the debt to income ratio is above 40%, it is difficult to get a loan without assets and clean credit.
This type of loan is good for borrowers who have larger than usual debt but substantial assets.
No Income No Assest Loans are great for Part-Time, Cash-Tip Earners, and Temporary Employee's. If you fit within the FICO guideline's than this might be the loan for you and your family.
SISA - Stated income and stated asset loans are loans that allow you to state your income along with stating your assets. The purpose of this type of loan is documentation relief. Self employed, investors, cash- earners, and tip earners sometimes find this type of program perfect for their needs.
Alternate Documentation mortgage program is a type of income documentation loan designed for home buyers who are self-employed, on commissions, or are not paid on a regular basis. One popular Alt Doc mortgage plan is the "bank statements loan" offered by non-prime banks, where the lender uses the amount deposited into the home buyer's checking or savings accounts over the most recent 6 to 12 months as basis for income calculation.
Uncoventional Income - Income sources for home loans and mortgages do not always have to come from salaried or self employment. There are various ways to earn income including:
• Part-time
• Second job
• Seasonal employment
• Alimony
• Child support
• Foster care
• Roommate rental income
• Pension
• Retirement income
• Investment property income (100%)
• Housing allowance for military or clergy
Employment history and length of employment are crucial when using a reduced or no documentation loan.
Even if you are self employed be prepared to prove how long you have been in business. Oten times a business license, business checking account, or a letter from your accountant will satisfy this requirement.
Twelve months of bank statements can also be used to proove your income. This is a useful method of verifying unconventional income - vs - going stated, the twelve months bank statements will yield a lower interest rate.
You are not required to disclose other sources of income, and if they aren't necessary to qualify for a loan, you may opt not to. However, other income such as child support, alimony, etc., can be used to help qualify for a mortgage if needed.
Income from part time jobs can be used to qualify for a mortgage as long as the applicant has had the part time job for at least two years, and there is likelihood of continued employment. Some banks only allow part time job income of up to 25% of the primary income to be included in the qualification ratio.
The more income that you can provide your mortgage professional, the more loan programs become available to you. Every little bit helps when you are applying for a new mortgage. Your debt to income ratio (DTI), is a major factor when trying to qualify for a mortgage. The lower the DTI, the greater chance you have of being approved.
Some lenders will allow the use of a car allowance and/or a cell phone allowance to be used as income. There will have to be a good consistent history of recieving this money and you will need proof that it will continue to have a chance at a lender allowing this.
If you have hard to prove or unconventional income it may be easier for you to secure a mortgage through a stated or no doc loan program. These programs were designed with borrowers in situations where income is hard to document.
How much do I have to make to afford a home - There really is no set income level you need to achieve in order to buy your first home. The lending companies have set guidelines so no matter what your income level you are not going to be in financial trouble.
If you have difficulty verifying your income, there are stated income loans that could be available to you.
There are many factors that are considered when trying to figure out if you make enough money to afford a home. Most people make enough money to afford a home, but the question becomes do you make enough to afford the home you want. If you can only afford $1000 a month for a mortgage it is not likely that you will be able to buy a $500,000 house with out a large down payment.
A general rule, is you should not make less than twice what your total monthly expenditures will be with your new mortgage (Including monthly taxes and hazard insurance).
Qualifying for a mortgage loan can be a relatively simple process. How much you can afford, or qualify for on paper, can be determined by your mortgage professional. However, you should figure out how much you or you and your family feel comfortable paying towards a monthly mortgage payment each month. Just because you can qualify for a 300k home does not mean you need to buy a 300k home. Remember there may be repairs that might need to be done to the home, you will probably still want to do family vacations, saving for retirement, activities for the children, and many other things that will come up or you need to think about when deciding on how much of a payment you want to make each month. You don't want to fall into the trap of "letting your home own you instead of you owning your home".
Debt ratios - Your debt to income ratio, also know as DTI, is calculated by adding your total monthly income, adding your total monthly liabilities, and then divinding the two numbers. This will provide you with your monthly Debt to income ratio.
Lenders will also use the fully indexed mortgage payment including taxes and insurance to determine the DTI. This means loans with small initial start rates, are not any easier to qualify for due to the small initial payment.
If your student loan payments are deferred but are still required to be calculated in your debt to income ration, be sure to obtain a copy of the original student loan documents. With the principle, interest rate, and term, your loan professional can determine a payment that may be much less than the lenders estimates.
If your debt ratio is to high, there are stated income programs available to you. With a stated income program we will simply state what your income is, and it will not be verified via paystubs and tax returns. Remember that just because there are things that you can do to avoid debt ratio problems, you still need to be comfortable with your monthly payments.
Your debt to income ratio is used, in part, to determine how much money you can afford to borrow. Generally lenders want to see a debt to income ratio of 45% or less, although some loan programs allow you to go higher. This means that the amount you pay each month in debt cannot exceed 45% of your monthly income.
With compensating factors to your whole credit package, such as a lot of money put away somewhere in the form of liquid assets, low LTV (Loan to Value), great job time, low loan terms (15 year mortgage vs. 30 year mortgage) amongst others, you may be able to get qualified for a home loan with a higher DTI (debt to income ratio) than usual. This is very common with the use of automated underwriting engines, such as DU (Desktop Underwriting).
When calculating debt-to-income ratios, lenders will include the following things in your debt: your proposed mortgage payment; credit card payments; car payments; loan payments, including student loans; second mortgage payment or home equity line of credit payment; and payments for any loans you may have cosigned on, even if you are not the one making the payment.
They will usuallyinclude student loan payments, even if you have not started making payments yet.
They will usually not include payments on any account that has less than 10 monthly payments left.
They will not include payments for any accounts that you are going to pay off before or at closing.
Some lenders will allow you to not include a cosigned debt into your debt ratio, if the account is over 12 months old and you can show proof (12 months of proof) that someone else is making the payments on the debt. Cancelled checks would be the most fool proof way to show that someone else is making the payment. If the other person is paying you with cash there will be no way to prove that they make the payments and you will have to keep that debt calculated into your debt to income ratio.
If you plan to consolidate some credit card debt with your refinance, paying accounts off at th closing will remove them from the DTI calculation. Generally, it makes sense to pay off the accounts that have the highest monthly payments relative to their balances. Your mortgage professional can help you make these decisions to your best advantage.
