One prominent factor that will determine whether a borrower will get a prime interest rate or a subprime interest rate is their income.

A borrower will receive the best interest rates available only if:

Their income can be documented

They have had the same job for a minimum of 2 years or have been in the same line of work for a minimum of 2 years.

There are no gaps in their 2 year employment history

Their total GROSS income (before taxes) represents 45% or less of their TOTAL MONTHLY DEBT. This is known as the debt to income ratio (DTI). Monthly debt includes the principal and interest , property taxes and insurance of the new projected loan at the new interest rate, as well as all credit card debt and any other revolving debt, (i.e. car payment, boat payment, timeshare payment, etc).

Credit card and other revolving debt is added to the debt to income ratio by adding up the minimum monthly payment required to satisfy a creditor, not the total debt owed. For example you might owe $4,000 on a credit card, but the minimum monthly payment required is $64. Only $64 will be added to the total monthly debt when determining your debt to income ratio.

Sometimes other compensating factors will allow the DTI to exceed 45%, but it's a good rule of thumb

Exceptions to these stipulations are:

Income may not have to be documented if your credit score is over 680 points and you do not want cash.

Income may not have to be documented if your credit score is over 680 points and you want cash but are borrowing less than 75% of the total value of your home.

In these cases a 680 point credit score is the absolute minimum for the opportunity to not document one's income and still retain the best interest rates. It will be much easier for a borrower to qualify for a loan and not have to submit income documentation if their credit score is well above 700 points.

However, having said all that, other factors may apply and ultimately deny the borrower the opportunity to not document one's income. Oftentimes this qualification can only be determined on a case by case basis.

If one is employed in a salaried job the documentation of the income is not a significant factor as a w2 will indicate exactly the annual, and through simple division, the monthly income the borrower has received that year. This is a much more important factor for those that are self-employed and are taking Schedule C deductions.

By now you must realize that your loan scenario is unique and should always be analyzed by an experienced professional. If you wish to find out more about YOUR specific loan situation you can go to my website and put in your information. I will receive your request by email and contact you soon afterwards.