Qualifying For A Mortgage

In order to determine how much of a mortgage you qualify for, a lender uses a ratio calculation that shows how much debt you have in relation to your income, in addition to looking at assets and credit scores.

Income

Sources of income that can be counted toward your loan qualification include (subject to Navy Federal guidelines):

• Rental income from other properties owned (25% vacancy factor)
• Gross pay with a 2-year history (before taxes)
• Military pay/military allowances (BAH, BAS, etc.)
• Retirement/Social Security/disability
• Alimony/child support with 3 years remaining and 1-year history of receipt
• Overtime/part-time/commission earnings with a 2-year history
• Bonuses with a 2-year history
• Personal business income with a 2-year history

Debt

Monthly debts that will be used in your qualifying ratio include:

• Revolving accounts (credit cards/lines of credit)
• Installment loans
• Vehicle leases
• Student loans
• Alimony/child support
• Child care (VA, HomeBuyers Choice & Active Duty Choice^® loans only) for children 12 years and younger
• TSP or 401(k) loans
• Mortgage loans on other property owned
• Advanced pay (VA loans)

Funds for Down Payment/Closing Costs

Assets and acceptable funds for your down payment/closing costs include:

• Savings
• Secured financing
• 401(k) loan
• Gifts from an acceptable source (maximum amount of gift allowed is determined by the Loan to Value (LTV)—in some cases a 5% down payment must be your own funds)
• Seller concessions (to be addressed in the sales contract) with maximum seller concession determined by Loan to Value (LTV)
• Secondary financing

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