Forum Replies Created
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Yes, for a short sale to occur when a homeowner has two mortgage loans on their home, both lenders must approve the sale price. This is because both lenders have a financial interest in the property, and they each need to agree to accept less than the full amount owed to them. If one lender does not approve the short sale, the sale cannot proceed. Negotiating with both lenders is crucial to successfully completing a short sale.
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Gustan
AdministratorSeptember 1, 2024 at 9:35 pm in reply to: Collection Accounts during Mortgage ProcessThis situation is alarming, but it’s not the absolute end of your loan application process. Medical collections are treated differently than non-medical collections. Non-medical collections can affect the mortgage process and may derail your mortgage approval. However, mortgage lenders often ignore medical collections. However, any medical or non-medical collections can impact your credit scores. Let’s analyze the effect of the situation in question and the possible measures you may take. You can get approved for a mortgage with a brand new medical collection on your credit report. However, the drop in credit scores may become an issue.
Impact on credit score:
- A co-borrower will not be bothered too much by a missing payment of a small medical bill of $149.
- This is especially true if their credit score is good otherwise.
- There is damage to one’s credit, although such negative items can only affect it to a certain degree.
Loan process implications:
- Most lenders have room for minor credit issues that crop up during the mortgage process.
- Most lenders understand that it is nigh impossible not to incur medical debt, and even if one stays, nothing is sought.
Timing is important:
- It’s a minor plus that you have already started the mortgage process and are simply waiting for an appraisal.
- Many applicants seeking loans are usually denied because of changes in credit history during loan underwriting.
Communication is key:
- You must notify your loan officer of this issue as early as possible.
- The fact that there is too much information at hand helps inform the lender that you are responsible for matters like that, and the problem is solved early on.
Options to consider:
- Pay the bill right away if it can be done.
- Dispute the bill if it’s an error definition
- Send in a letter of explanation to your lender.
Lender’s perspective: Lenders’ main interest is generally whether the mortgage will be paid back. A small medical bill, however, is less serious than a non-medical collection account.
Debt-to-Income Ratio:
A $149 bill will likely maintain one’s debt-to-income ratio, a critical determinant for lenders.
Potential for rapid rescore:
- If the bill payment will largely improve the co-borrower’s credit score, then it would be rational to inquire about a rapid rescoring from the lender.
- This allows you to change your credit report much faster than waiting for the normal reporting time.
Overall financial picture:
- Lenders look at more than one aspect of your finances.
- If all other factors are good (steady earnings, positive repayment record, adequate equity), then this one factor is not likely to be a show-stopper.
- Whereas this situation is depressing and stressful, it is important not to lose your head.
Here are the immediate next steps, as I usually advise people:
- Let your loan officer know of that situation as soon as possible.
- If no reimbursement is done, urgently contact the medical provider and the medical bill.
- Collect any relevant documents associated with the above-mentioned bill (when it was incurred, why it was not paid, and payment evidence if you pay it now).
- Ask your loan officer how this will affect your application and what they recommend you do.
- It is also advisable to be ready to provide a letter of explanation to your lender whenever requested.
- Lenders tend to prepare for last-minute issues like these.
Of course, I cannot assure you that even if you owe just one small unpaid medical bill, it won’t affect your loan. However, this is usually one of the minor issues easily overcome during mortgage acquisition.
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Gustan
AdministratorAugust 31, 2024 at 10:31 pm in reply to: Is 120 Day Late On Mortgage Payments Considered ForeclosureLet’s deconstruct these questions regarding mortgage delinquency and foreclosure:
- Is a 120-day delayed adoption of mortgage payment a threat of foreclosure?
- No, being 120 days late is not itself foreclosure.
- But rather an optimistic milestone in undermining the process before exhuming.
- By this time, nearly all lenders can decide to level forbearance.
When do they issue the first notice of default?
- After how many late mortgage payments?
- Normally, the law allows foreclosure after 120 days of non-payment as one rushes to pay.
- However, this time may change depending on the country and lenders’ operations.
Exceptions to the 120-day foreclosure rule: Some exceptions include:
If the property is determined to have been evacuated
If the borrower has committed a certain act of bankruptcy
If the servicer is joining the foreclosure action of a higher or lower secured creditor
What does 120 days delinquent mean? It means the borrower has not paid their mortgage repayment for four months.
What does the 120-day default period mean regarding a mortgage?
- This means that a borrower will be considered late every month from this day.
- The lender can only start the foreclosure proceeding once this timeframe elapses as the regulations are established at the federal level.
How far backward can one go in terms of mortgage payments?
- According to the technical definition, you can remain in arrears until the lender seizes the title.
- Nevertheless, in most cases, lenders will initiate the foreclosure process within 120 days after payment is missed.
How long can the homeowner stay without making their mortgage payments?
- The delay in mortgage payment can be as much as 120 days before foreclosure proceedings can begin.
- But as much as you may delay a payment, one payment is overdue.
- There can be late payments and downgrading of credit scores.
- Here are the chances of the rate escalation.
What happens if you have not paid your mortgage for three months? At this point:
- Aggressive late fees will likely come your way.
- There will be a huge dent in your credit score.
- A lender may take steps toward pre-foreclosure.
- You are now nearing the point of 120 days where formal proceedings can be commenced to bring the house to sell.
Can a bank foreclose if you are making partial payments?
- Yes, a bank can be in a position to close a foreclosure.
- Despite you paying a partial mortgage.
- It is because the lenders themselves are around full payments.
- There may be no credit for partial payments.
- Therefore, once a full loan payment is provided, your account has corresponding credit.
- It is important to note that foreclosure processes are usually not the first course of action for lenders.
If you are having difficulties making these payments:
- Reach out to the lender as soon as possible to find an arrangement.
- Investigate modifications on the loan.
- If you can, try to refinance.
Investigate available government benefit programs:
Find a qualified Housing Counselor from the Department of Housing and Urban Development (HUD):
- As a buyer, be aware the particulars may vary according to your loan contract details, the laws of each state, and the specific situation.
- You must seek the guidance of an attorney who practices real estate law in your area if you suspect your property is being threatened with foreclosure in the near future.
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Gustan
AdministratorAugust 31, 2024 at 10:19 pm in reply to: Correlation between house prices and interest ratesLet’s start from the start by answering your query about housing, interest rates, and refinancing one by one.
On the relationship between house prices and interest rates:
- Typically an inverse relationship exists between the interest charges on mortgage loans and the prices of houses within the real estate market.
- In an upwards adjustment of interest rates, home purchasing becomes costly and this causes the demand to slump thus causing prices to follow suit.
- When the rates are low, everything is cheaper, including borrowing.
- This can boost the activity and prices.
Refinancing when rates, inflation and home prices are high:
- This is generally poor timing for a refinance.
- Normally refinancing is done so that you can obtain a better interest rate, that will be difficult in a high rate environment.
- But that is not to say it cannot work in particular individuals.
Is it good that interest rates continue to increase?
- It’s subjective.
- Higher rates can bring inflation down and alleviate an economy which has expanded quickly too much.
- If the rates rise, the interests on savings will also rise making savers better off.
- However, the cost of money also increases which dampens the economic activity since the cost of acquiring loans especially mortgages becomes high.
Consolidating debt by means of high-interest refinancing:
- In general, it is not usually a good idea to refinance at a higher rate unless sufficient reasons exist.
For example: This is basically to switch from adjustable-rate mortgage to favorable stability of fixed-rate mortgage.
Why should you refinance: This type of thinking in refinancing is mostly possible and makes perfect sense in cases when:
- A clear lowering of the interest rate by 0.5-1 percentage points or more is achieved.
- The saving realized by not paying against the future interest for a particular period savings in the cost of the loan exceeds the cost of closing.
- You will reside in the home for a considerable period of time for the amount spent on refinancing to be neutralized.
Purchasing a home in circumstances of elevated inflation:
- Where inflation is high, it can be a curse and a blessing.
- A blessing since, as people would say, real estate is a good investment because the value of properties rises over time.
- A curse in that high inflation means high interest thereby making loans for home purchase expensive.
- The choice depends on personal factors, the area, the demand of the market, and the budget over the years.
The relationship between the interest rate and the price of a house:
- As stated already, it is an inverse relationship most of the time.
- Higher rates tend to lower home prices while lower rates tend to increase the prices.
Buying when interest rates are high: Buying when rates are high that shin increases purchases:
- Less competition from other buyers.
- Low costs of homes.
- Able to make refinances in the future- in case the rates fall.
- Despite the benefits, inconvenience of the higher monthly payments is usually a considerable disadvantage.
Interest rate forecast for the next 5 years:
- Nobody has a crystal ball.
- Nobody has access to present information and it cannot predict economic effects accurately.
- Requests for interest rate estimates are vulnerable to rapid changes due to economic and political developments.
- The correlation of current norms with the forecasting is preferable using ‘trend’ movements from active financial companies.
What’s a good mortgage interest rate?
- What would be deemed as a “good” rate depends on factors such as economic cycle, type of loan in question and borrower’s negotiation skills and situation.
- At my most recent update in August, 2024 rates were lower than the rates crested in the low half of previous years.
- The more lenders one approaches it is quite prudent in today’s situation to see with history considering mortgage rates are puzzled over what a weak deal is and is not.
Finally, due to the degree of complexity of these subjects and the affording of making considerable financial decisions, it is always good practice to see a financial advisor of a mortgage specialist for assessments targeting your position in this market.
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Gustan
AdministratorAugust 31, 2024 at 10:09 pm in reply to: How Much Money Do You Need To Buy a HouseHow Many Reserves Do You Need After Having Received The Home Purchase Amount?
Normal Requirement:
- Apart from cash deposits, lenders usually require reserves of between 2 and 6 months of housing payments.
- Depending on the type of loan, property, and applicant.
High-Risk Profiles: More reserves may be required for borrowers with higher DTI ratios or those buying properties as investments.
What Is The Maximum DTI Ratio For A Home Purchase?
- These loans usually have a maximum DTI of about 43% to 50%.
- In some extreme cases, a FHA borrower can have a DTI of 46.9% front-end and 56.9% back-end.
- It is preferred that DTI is 41% or less, but such loans may include excess of this standard.
How Do Student Loans Affect The DTI Of The Individual?
Lender Use Of IBR:
- A common and understandable alternative is that lenders will take the IBR(based on annual income) as found on the applicant’s credit report.
No Shown Payments:
- In the absence of shown payments in the credit report or the latter showing a zero-dollar payment, the lenders may apply a required percentage of the loan amount (usually one percent).
- Or may apply a deemed payment based on the amortization of the loan.
What Is The Maximum Loan Amount You Can Have For A Home Purchase?
Conventional Loans:
- The single-family conforming loan limit will remain at $766,550 in 2024.
- This limit applies to most areas.
- Although higher amounts may apply in high-cost areas.
- High-cost areas have maximum loan limit of $1,149,250.
FHA Loans: Limits depend on counties, but they usually cost $498,250 for most areas.
Jumbo Loans: Those who exceed these limits must get jumbo loans with additional requirements.
How Much Money Should You Have Saved Before Buying a House?
Down Payment: A rule of thumb is that 20% must be saved to avoid needing PMI cover.
Closing Costs: Extra payment on the prices must be budgeted for between 2 and 5 of the price.
Reserves: One to six months Reserves of mortgage payment:
Emergency Fund: A good amount of reserves is 3 to 6 months’ worth of living expenses.
Is $5,000 Enough to Buy a House?
With Assistance: $5,000 may be sufficient if down payment assistance is available or VA or USDA. However, no down payment loans would normally be used more with additional resources, closing costs, and reserves.
How Much Income Do You Need to Buy a $200,000 House?
General Estimate:
- With a 30-year mortgage at 7% interest and 20% down, you should earn an income of $50,000-$60,000 gross one year.
- This is assuming these two factors hold true.
- Your requirements shall be based on DTI, debt, and other factors.
Is $50K Enough to Buy a House? It depends on location and costs:
- $50K could buy you a decent-sized house if you combine it with some savings and assistance programs.
- Furthermore, some closing costs could be better; it is important to note all costs.
- This is including future payments and reserves.
How Much Should I Spend on My First House?
Rule of Thumb:
- Buying a house for 2.5-3 times the family’s gross annual income.
- Further, if you have a mortgage, this payment should exceed 46.9% front-end and 56.9 % back-end debt-to-income ratio of your gross monthly income.
How Much Should I Invest in My First House?
Investment Consideration:
- Invest so that you can afford 20% of the house price to eliminate the Private Mortgage Insurance (PMI).
- The house can be approved on good loan terms.
- Think of the total expenses of owning the house, including property taxes, insurance, upkeep, replacement of broken fixtures.
Note: Each buyer will define their goals or needs differently. For these general recommendations, it will be important to include an additional discussion with a financial planner or a mortgage broker.
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Gustan
AdministratorAugust 31, 2024 at 9:41 pm in reply to: How Much Are Down Payment and Closing Costs on Home PurchaseHome Buying Financial Readiness
This is because buying a home is a commitment that usually requires more than a down payment and closing costs. Several expenditures must be planned to make buying the house easy and ensure everything is well after the papers are signed. Let’s tackle all of your questions one by one.
How much money should you keep after completing the closing on the house?
Recommendations: The need for post-closing reserves:
Emergency Fund: It is always better to have some emergency fund for however long living expenses continue. In this case, once the closing is done, between 3 or even six months’ worth of normal living expenses or more. What this fund should take into account includes.
- Monthly mortgage payment(s).
- Other bills, such as service costs.
- The cost of food or shopping.
- Home repair and maintenance costs have yet to be budgeted for.
- Costs or payments related to other incomes or debts, e.g., car and student loans.
- So what is the reason for this?
Financial Perspective: Property owners have unpredicted expenses. One should also understand how much savings should be kept aside to ensure that one does not fall into financial constraints during sickness, house repairs, or even loss of employment.
Loan Approval: Certain lenders require cash reserves totaling almost three months of the mortgage, which is meant to secure the loan even in unforeseen circumstances.
Houses:
- How Much Do I Need to Have Saved to Purchase a House?
- Why is saving so important at the onset?
- How much capital is needed at the beginning?
How Much Down Payment on Average:
General Considerations: One can cut costs by creating a buffer of 20% by carrying less debt.
Avoid Paying Private Mortgage Insurance (PMI): PMI is a charge retained for insurance of American homes when homebuyers borrow more than 80 of the home’s value in the house mortgage loan.
Over and Over Get Beneficial Loan Terms: Larger loans, with a large mortgage down payment, usually get better terms.
Let Go Of The Monthly Amount Installments Of The Money Taken As Loan To Be Small: To minimize and fix what a borrower pays on the loan, medium payment is the best in doing this way.
Common Ones Seen:
Less Money Down:
Conventional Loans: Some institutions can make loans from I3 to I5 percent of the home value.
FHA Loans: Generally, most lenders or institutions require a downpayment of 3.5%, though this varies. However, this is ideal for first-time homebuyers or not-quite homeowners with bad credit. Overall, the LTV ratio allows risks for lending and borrowing to be managed properly by factors including the valuation of homes being bought.
VA Loans: The loans are made available for active duty personnel and veterans with the provision of 0 percent down.
USDA Loans: Another loan purpose is to purchase a home, especially in the hinterlands; hence, no deposit is required.
Important Perspectives:
How to Decide That Shifts Over Time: Consequently, houses have relatively lower deposits, borrowed amounts continue to increase, and hence, the monthly repayments and total interest payable level increase, too.
Satisfaction: Focusing on the length of love will help you set aside enough money for a good down payment and not deplete your entire contingency.
What If You Are Stuck Because You Can’t Afford a Down Payment?
Options to consider:
Down Payment Assistance Programs:
Local and State Programs: Many states and cities provide some subsidies or soft loans to avoid such loans, particularly to first-time home buyers.
Non-Profit Organizations: Some organizations help citizens with specific income and qualification requirements.
Gift Funds:
Family Assistance: Most lenders are willing to accept proceeds from a family gift as a down payment on a mortgage. However, documentation and a statement illustrating why the funds in question were given rather than loaned need to be produced.
Zero Down Payment Loans:
VA and USDA Loans: All payments are optional if the borrower qualifies for one of these loans.
Saving and Looking for Activities:
Reducing Costs: Cut unnecessary expenses so that more will be set aside for savings.
Augment Income: Take on extra hours or work a few other jobs to save more.
Adjustment of Timeframe: Push forward the purchase plan to make the necessary savings.
Other ways to obtain the funds:
Piggyback Loans: This means seeking an additional loan to meet the down payment requirement, although such a move would come with some problems with risks and costs.
Seller Financing: The seller may provide partial financing for the items purchased at other times.
Disadvantages of Low Down Payment:
High Monthly Payments: The down payment is lower with larger loan figures.
PMI Costs: Other payments shall need additional monthly payments until adequate repayment has been done on the loan.
Risks of Having Less Equity: To keep or buy, one must make a low down payment. Reduced equity means less time to recover or a greater chance of losing in the case of property depreciation.
What Is the Minimum Remaining Balance After the Down Payment Required for the Borrower?
Recommended Remaining Savings:
Closing Costs: Point out that the need to set aside, usually 2% to 5% of the purchase price, is reserved for closing costs where it is not waived through lender or seller credits.
Emergency Fund: As mentioned appropriately, there should be savings in a form that can be enough for one to last for three to six months in basic maintenance.
Moving and Initial Setup Costs:
Moving Expenses: These involve getting help from relocation agencies, renting trucks, or buying boxes for the items that have to be moved.
Immediate Expenses After Moving: Other costs that one is likely to incur and that have yet to be budgeted for include repairs, fridges, built-in boards because they are custom-made, and others.
Budget for Home Maintenance: It is also wise that a homeowner allocates a small annual budget to cover repairs needed in the years following the purchase. This is estimated to be about one to two percent of the house’s annual purchase price.
Reasons for Retaining Cash After Purchasing a New House
Security: It helps relieve the burden of wanting to pay some bills, leaving room to embrace new financial obligations without feeling stressed.
Taxes On The Property: At other times, a large Property Transfer Tax or stamp duty is levied at the time of property transfer agreements, properties, and rights.
Occupying Property: After the exchange, the beneficiaries of the real property enjoy the occupation of it or take it into possession and removal to render it back to use in the place.
How Much Of The Lot Value Has To Be Covered By Lenders If I Want To Be Able To Borrow a Down Payment And All Other Reserves?
Considerations Even In The Absence Of Margin Requirements Or Credit Controls:
How Much Savings Are Needed To Cover This Necessity, And How Much Funds Should I Have:
Reserve Funds:
It’s common for borrowers to receive ‘reserves’ like regular rental payments for one’s dependents, stories, or spare cash opening one credit account.
Housing Backup Fund: The distance may be higher than this distance but may be greater as it appears safer.
Budget and Forecast Expenses Not Included:
Inspection Cost: Depending on various factors, it ranges between two hundred and four hundred dollars.
Appraisal Fees: These costs vary and may range from $300 to $600. Lenders incur these costs to appraise the property.
Earnest Money Deposit: An equally important deposit is an earnest money deposit. This can be about one percent up to three percent of the total price of the purchase and is refundable or applied towards the purchase.
Moving Costs: These costs vary and depend on the distance and volume of goods to be moved.
Immediate Repairs or Essentials: These are the essential repairs needed when moving, such as installing utilities or purchasing basic furnishings.
Should such expenses arise regarding:
On-Hire Appraisal For The Security:
Closing Cost Overruns:
Additional expenses often exceed the forecastable amount if closing costs are covered by either the lender or the seller.
Property Taxes and Insurance: These limits can be requested to be settled in advance and pulled into a pool in a closing account.
Suggestions Regarding the Savings Amounts:
Savings: The Minimum Recommended Savings:
Assume the cost out of your pocket for closing costs will be zero. All of them will be paid for. Even in this case, one must try to have $5,000-$10,000 for other related eventual and unexpected expenses.
Furthermore, there are strong feelings of anxiety which seem to subside once a reasonable safety net with regards to emergency illness has been stressed further.
Default and General Recommendations
Check Your Financial Capacity: Estimate how much you earn, spend, borrow, and save to determine what amount you feel comfortable spending.
- Talk to Many People.
- Including Lenders.
- Discuss what kinds of loans are available and what the criteria are for getting a loan.
Advisors: Get how you want. It doesn’t matter. Get it done as per your requirements.
Save and Plan: Avoid procrastination when it comes to saving. Do not look for a house first, and then start searching for initiatives that help purchase a house. Understand all possible expenses regarding owning a residential property.
Be advised: It is equally important to factor in even the smallest things, like hidden costs, the cost of the house, and the loaning interest. No one should live under anxiety after making this purchase owing to having planned for it and putting some cash aside for it.
Please let me know what loan programs or assistance options interest you and what you want to know.
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Gustan
AdministratorAugust 31, 2024 at 9:18 pm in reply to: Calculating Rental Income Based on DTI RatioHow Rental Income Is Assessed For Mortgage Qualification
How is rental income factored into how mortgage underwriters work?
General Approach: Although underwriters favor using 75% of the gross rental income due to lack of use and potential expenses, mortgage payment, taxes, insurance, and other expenses are removed to arrive at net professional rental income.
How do the Banks treat rental income in the debt-to-income ratio?
DTI Calculation: Rental income is taken as part of one’s gross income and contributed to all current debts within the property’s mortgage and debts inside it.
Are Leases taken in as Asset Debt and rent included in the DTI Ratio?
Leases: In DTI calculations, leases are not ‘netted,’ but income from such leases is treated as such. This helps lower your DTI ratio.
Does a mortgage lender consider the earnings an applicant is yet to earn?
Future Income: Lenders do not usually factor in future income unless it is guaranteed, such as a lease or valid employment contract due to commence within sixty days from closing.
Are tenants’ incomes considered by the banks when applying for mortgages, and what type of properties are constructed?
Yes: Rental income, however, is also taken into account. In most instances, about 75% of gross rental income is factored in, aimed at occupancy risk.
Can we utilize future Airbnb sites’ earnings arising from Airbnb experiences and availing of income to finance a house?
Airbnb Income: More often than not, short-term rental income. For that matter, Airbnb income must have a supporting history of activity for two years to qualify for consideration. Later on, Airbnb income is usually disregarded.
How Much is the Anticipated Income of Property Rent?
Projected Rental Income: This entails the rent anticipated to be earned from a rented apartment, adjusted by the available rental rates. It may also apply when an actual lease is present.
Can I Use the Income I Will Earn In The Future to Get A Loan?
Future Income: Any loan requires the present levels of income or Non-Current income with future contracts that could be certified and verifiable to be available.
Can Future Income from Rental be Used for FHA?
FHA Loans: There are scenarios where FHA will consider future rent receipts. This is usually a multi-family situation where a borrower lives in a unit. A lease must be present to back up the future income.
What Reasons Would You Provide to Justify the Rental Income You Suggested in the Beginning?
Padding Method:
- Gross rental income.
- Deduct costs incurred (including mortgage, insurance, and taxation).
- Apply 75 percent of the area net income to DTI.
Does FHA have these factors that allow it to accept future kinds of income for repayment?
FHA Loans: Under FHA loans, future income may be considered again when documented proofs such as employment contracts or lease agreements exist.
Can you show or state future rental income and use it to qualify for a mortgage?
Yes: Some lenders may allow the use of such future rental income if there is a lease or contract in place, especially for multi-family rental units.
What Procedures do the Underwriters follow to Evaluate Income from Rental Properties?
Verification: Underwriters usually complete rental income verification through tax returns, lease agreements, and rental income receipts.
Does the Income from Rental Properties Qualify Under Income Qualification?
Yes: The income from rental properties does qualify as income, usually 75% of the listed rental receipts after expenses are reported.
What are the Components of the Gross Debt-to-Income Ratio when Applying for a Mortgage?
DTI Components: A DTI ratio includes all monthly debts, such as housing-related debt (mortgage), credit card debt, auto loans, and more.
How Much is Considered as Maximum DTI in Investment Property?
Max DTI: This varies from lender to lender; the maximum DTI on Investment properties usually varies from 43% to 50%.
How is the Debt Ratio Defined in Real Estate?
Formula:
- DTI = = (All Debt Repayment / Total Earnings Received) X 100.
How Do Underwriters Treat Future Rental Income for the Restricted Criterion of DTI Ratios?
Future Rental Income: Underwriters mainly consider the expected rental income based on a lease. However, only 75% of that rental income is applied toward the DTI ratio.
This understanding helps build more confidence in using rental income to obtain mortgage approval by explaining the general principles applied in calculating rental income.
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