Lenders take into consideration several important aspects of your financial profile. A lender will certainly take a look at your income and compare that with your current debt load. Good credit is important as is enough money to close on your purchase. All ทาวน์เฮ้าส์มือสอง of these things are a requirement for a loan approval; but what happens if you're oh-so-close?
Sometimes a lender has a decision to make. And not just an overall approval of your loan. Some lending requirements are absolute rules which may not be overlooked and some are more of a guideline. For example, a loan might require that a credit score be no lower than 620. If the credit score is 619 then the lender may have no choice but to turn down the application.
Other requirements are less stringent but still important. For example, a debt ratio for a borrower is 43 but the guideline is 38. A debt ratio is calculated by dividing monthly debt by gross monthly income. If a lender is evaluating a loan with a 43 ratio when the guideline is 38, the lender needs to determine if they will go ahead and approve the loan and if they did, why did they override the 38 guideline?
One of the reasons a lender can issue an approval in such an instance includes what lenders call residual income. Residual income is the amount of funds available to the borrower each month after all the bills are paid.
For example, if a borrower has a debt ratio of 43 and a gross monthly income of $1,000 then $4,300 is used toward monthly debt. But that also means there is $5,700 left over for everyday expenses in residual income and would sway a lender to go ahead and approve a loan with slightly higher debt ratios. On the other hand, if a debt ratio at 43 with an income of $3,000 means $1,710 in residual income. In the case of lower income, lenders will scrutinize residual income more so than those with higher incomes.
Residual income is an important piece of the approval puzzle when loans are teetering on an approval. The more, the better. The less? Well, the lender may have to do some more thinking.
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