Income and Employment
When qualifying a borrower for a mortgage loan, mortgage lenders want to verify that the borrower has steady income and employment enabling them to meet their monthly obligations and pay back their mortgage loan.
Generally as a rule of thumb a borrower’s debt to income ratio should not exceed 41%. Debt to income ratios are defined by the borrowers monthly housing expenses (mortgage or rent payment) and the amount owed to creditors (credit card bills) divided by the total gross monthly income. Different mortgage loan programs have different qualifying standards when it comes to debt to income ratios. Generally FHA mortgage loans and VA mortgage loans are more lenient than a Conventional mortgage loan program. For more information on these mortgage loan products please visit the Loan Options section of our website.
In addition during the qualification process mortgage lenders want to verify that the borrower has sustainable employment. This means at least 2 years of steady employment with their employer is usually required, unless the borrower is just out of school and just started employment in their chosen profession, or the borrower has gotten promoted to a higher pay level. Keep in mind that with the latter, mortgage lenders generally prefer that the borrower’s employment remain in the same industry, as it shows more stability in their earning capacities. Employment stability is important during qualification because, as with credit history, it shows the borrower’s habits towards meeting their obligations.
