Showing proof of income?

[Richard C.]

Hey all,

I have newbie question here. When trying to get a loan/mortgage for a property I'm assuming they will ask you for income proof or tax returns to see how much you're making and what can you qualify for, etc. My question is what if you have a good amount of savings saved up over the past couple of years for a down payment and also an excellent credit score,  but don't have a lot of income showing on your previous yearly tax returns? How are you still able to obtain the property with little income to show for, but a lump of cash in savings? 

[Brie Schmidt]

Originally posted by @Richard C.:

Hey all,

I have newbie question here. When trying to get a loan/mortgage for a property I'm assuming they will ask you for income proof or tax returns to see how much you're making and what can you qualify for, etc. My question is what if you have a good amount of savings saved up over the past couple of years for a down payment and also an excellent credit score,  but don't have a lot of income showing on your previous yearly tax returns? How are you still able to obtain the property with little income to show for, but a lump of cash in savings? 

 Loans approvals are based on your income, not savings.  

Take your provable monthly income before taxes and multiply by 45%.  Now decuct any payments that would appear on your credit (car payment, student loan, credit card min payment). What is left over is the max mortgage payment you can have.  

Let's just say if is $2600... In my area taxes are about $500 and insurance is $100 so that leaves me with $2,000 for principal and interest. I know conventional loans are $500 per $100k financed and FHA loans are $575 so that means I could get a $400k loan for conventional or about $350k for FHA