How to Calculate the Debt-to-Income Ratio in a Loan Modification
Aug 11, 2009 Real Estate Properties
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Loan Modifications are starting to be very popular. A loan modification helps people save their homes by reducing the payment in the loan. Nevertheless, not every individual who asks for a home loan modification gets the desired result.
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 monthly gross income. This is the money you make before taxes. In the case you get alimony or child support, you need to include these amounts.
Then, you should add all of your monthly debt obligations. This includes the minimum payments on your credit cards, car installments, the hoped for new mortgage payment, property taxes and property insurance. In this step, you don’t need to 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 opportunity to get approved for the mortgage modification, your doubled amount needs to less than the gross monthly income. If the amount is over the gross income, there is a good chance that you will not be given the modification.
Keep in mind that lending institutions are normally willing to modify a mortgage when the debt-to-income ratio is under 50% of your gross income. A few lenders will go up to 55%. However, the majority 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.
In addition, remember 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 can aid you present your case in a better light or even offer you suggestion on how to modify the debt-to-income ratio so that the new loan is given by the lending institution.
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Tags: finance, loan, Loan Modification, mortgage modification, personal finance, Real Estate, Real Estate Properties
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