self employed how much do i need to average 2 years tax return to qualify for 175000 loan

Asked by Belinda Yarbrough, McKinney, TX Sun Feb 24, 2013

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Tommy Burris’ answer
Tommy Burris, Mortgage Broker Or Lender, Baton Rouge, LA
Mon Feb 25, 2013
We would need to know your other debt payment.
I am seeing people get approved up to 50% total debt ratios..... while others are limited to 43% depending on the loan program.
Total debt ratio = PITI(principle + interest + taxes + insurance) plus all other monthly obligations(exclude utilities). Divide this by income to come up with your debt ratios.
You can call me. I would gladly go over this with you over the phone before we even need to take an application and pull credit. If your ratios are fine I would offer to take an application at that time.

Let me know how else I can help

Tom Burris
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Darrell Self, Agent, Allen, TX
Sat Mar 23, 2013
Definitely give Tom Burris a call he is a great lender. He stays up to date on the current changes in the mortgage market. He has answered your question below I refer clients to him all the time.
Call him you will not regret it!
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T.E. & Naima…, Agent, Dallas, TX
Mon Feb 25, 2013
If you put down a minimum for FHA loan, including taxes and insurance, a 4% rate would take about $3,700 absolute minimum or $5,100 typically a month in gross earnings over the last 2 years. No, this is not guaranteed or an offer to lend. Rates, down payment, credit standing and other factors apply.

The calculation is straight-forward, although not easy to understand. The current interest rates are around 4%, which you can your rate independently. The principal and interest on a loan of $175,000 for a 30-year at 4% is $835.48 monthly. In addition you would have to pay into escrow for taxes, insurance and MIP.

A typical house priced around $180k bears a 2.5% tax rate, or $5,500 per year, $458.33. If you know the tax rate on the house, you can figure this more accurately. Tax rate do vary widely over DFW, from 1.8% to 3.3%, but typically are around 2.5%.

Insurance is again subject to the carrier and coverage you carry. While it is not a quotation for a particular coverage, you should budget for between 0.5% and 1.0% annually for homeowner's insurance. Typically, our experience is that buyer find insurance for about 0.8% of value. You are normally required to carry insurance to protect the lender against loss for the full value of the house.

So, on a $180k house you should budget about 0.8% or $1,350 per year, $112.50 per month.

You will also be required to pay mortgage insurance premium (MIP), which is 1.75% in a single upfront payment at the time of closing, and can be rolled into the loan balance. If rolled into the loan balance, the payment would rise by about $8/$1k of loan, or $15/month for this $175k loan.

But, there is also a monthly MIP payment, which for loan-to-values of 95% or more (includes the minimum 3-1/2% down case) is 1.25% per year or about 0.104% per month times $175,000 adds $2,187 per year or $182.29/month.

Now, adding all this up: 835.48 + 15 + 182.29 + 458.33 + 112.50 = $1,603.60 for a monthly payment. Note: taxes and insurance should be computed when you get the real figures. The $15 is for P+I on the increase in loan balance by adding the UFMIP.

So, this $1604 monthly payment cannot exceed 31% of your gross income and when your credit card and other loan payments are added the total cannot exceed 43%.

Let's say you don't have any other debt (unlikely). Then you can calculate $1604 as 43% of your gross, making your gross at least $3729.30 per month if allowed. Or, normally $1604 is 31% of $5,172.90, which means an annual income of $62,075.

Good luck. I hope you enjoyed the higher math.
0 votes
Andrea Brooks, Agent, Plano, TX
Sun Feb 24, 2013
Hi Belinda - I think you would be best served by contacting a mortgage professional about this. I can recommend several leading professionals and would welcome the opportunity to further assist with your home purchase.

Please feel free to give me a call: 469-450-1326


Andrea Brooks
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Sun Feb 24, 2013
It is a combination of debt, credit, credit history and 2 years tax returns to show income. It is a puzzle and involves more than just the tax returns. Go see a lender or two.
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Kenneth "Ken…, Agent, Dallas, TX
Sun Feb 24, 2013
I believe you have to report at least a 1/3 of the price of the house your trying to buy. Contact any lender of your choice to get the hard facts.

Turtle Creek Realty
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