Low income buy house
The problem of income is challenging if your in the housing market and its low.
When you find the right buy, or you get your mind set on the house of your dreams,
nothing can stand in the way like not being able to qualify. Most lenders use a formula such as this.
Your income to mortgage payment ratio of the home you would like to purchase cannot exceed 36% to 50%
of your gross monthly income after expenses.(depending on lender or program)
To get a rough estimate of this figure, take your total monthly expenses on your credit report
Credit cards
Student loans
Other mortgages
Other loans
Add these items together, then subtract it from your total gross monthly income before taxes. With that figure, multiply your remaining monthly income by:
.36 - Conforming loan (best)
.45 - Conforming loan (better)
.50 - Non conforming loan (good)
The figure you arrive at is the amount of house payment including taxes and insurance you qualify for based on income. Credit will also come into play at
arriving at this figure, however for this example we are only looking at income.
How to squeeze out more income
There are many ways to buy a home maximizing the amount of income you currently make.
Before we get into the different ways we should mention that the easiest way to
maximize your income is to pay down your bills. Any car payment with less than 10 months remaining does not need to
be calculated in "Debt to Income" Ratios.
Use bank statements for income
There are allot of programs that allow you to use 12 or 24 months of your personal or business bank statements as income.
As a rule you can use a percentage of the deposits as credit for income:
50% - 75%: Business
75% - 100%: Personal
*See tips on bank statements for more information
Stated income mortgage
If your credit score will allow, usually around 640. You can qualify even with low income by simply "Stating" or telling the lender how
much you earn, which is always exactly the amount that you need to qualify. These loans are getting harder to come by these days so time is of the essence.
No income documentation/No asset loan
This is a safer type of loan because there is virtually no risk to you as there is with a stated program. This type of loan requires no documentation or verification what so ever regarding how much income you earn each month.
Select good loan programs
How you can turn your low income into more per month is by selecting a good loan program. Get a lower interest rate, or stretch the term of the loan out as far as possible. 40, or 50 years. This can reduce the overall payment and help you qualify for more loan.
Our experience helping people buy a house
During our years of lending experience, the best way we have found to increase monthly income was by using bank statements. There can be a couple of hang ups when attempting this, so please read our tips on bank statements.