How much income do you need to qualify for a mortgage
Lets have a look
Thinking about buying a home? Let us give you a general idea of how much income is required to qualify for a mortgage. There are many factors determining how much mortgage you will qualify for. This chart will give you an idea of the income required.
what does it take?
If you’ve seen or heard Bob, you already know income, down payment and credit are the key factors required to obtain a mortgage. But, did you know there are other factors, such as the Stress Test.
Lenders use qualifying rates to ensure borrowers can handle their payments if rates are higher on renewal. This allows a little breathing room so we can continue to enjoy the benefits of home ownership. The current qualifying rate is 4.94%.
Another factor when qualifying for a mortgage is, property tax. Lenders need to know borrowers are in a position to maintain the property taxes. Property taxes in the chart above are estimated at .65% of the purchase price.
For example a property valued at $350,000 would have annual property taxes estimated at $2275.
$350,000 x .65%=$2275
When determining a qualifying mortgage amount, heat also comes into the calculation. Typically heat is calculated at $100 per month (this number may increase according to square footage). Some condo properties include heat in the fees. Either way heat is a part of the qualifying equation.
In the chart, $100 was used for heat, except for the $200,000-$300,000 purchase prices, we included heat in the condo fees.
For properties where condo fees are present 50% of the annual condo fees are factored into the qualifying equation.
In the chart $300 was used for the $250,000 and 350 for the other examples, with heat included.
Mortgage default insurance
The chart above shows different down payment options, which contribute to the equation. A down payment in the 5% to less than 20% range mortgage default insurance is required. However, if your down payment is 20% or higher no additional fees apply. To learn more what fees are associated check out the difference between a high ratio and conventional mortgage post.
Amortization is how long will it take you to pay off the mortgage. If you have a down payment of 20% or higher then the amortization can be factored at 30 years. The remainder of mortgages are calculated with 25 years (or sometimes less).
In the example above 25 year amortizations were used for 5,10 and 15% down payments. The 20% down payment option reflects the 30 year amortization.
How much income is required to qualify for a mortgage is a great question to start the process. Once you take all factors into consideration, the picture becomes very clear. You may be ready to start shopping, or in the very least have a good idea of the steps required. To obtain a detailed pre-approval specific to your situation, give us a call or fill in an online application today.