V. MONTHLY INCOME AND COMBINED HOUSING EXPENSE INFORMATION


Gross Monthly Income:

In order to determine your ability to repay the mortgage loan that you have requested, the lender must be informed of your monthly income. Your monthly income and any Co-Borrower's will be used in this determination. One of method used in underwriting a residential loan is to calculate the ratio of your monthly income and the mortgage debt and the ratio of your monthly income and the total monthly obligation( house payment plus any other monthly credit obligations). The monthly mortgage debt to income ratio is generally in the 28% range and the total monthly debt to income ratio is generally in the 36% range. Though these ratios are an important part of the credit underwriting process, there are many other areas on the application that are used in rendering a decision on a loan. Please include all the income as requested on the application for yourself and any Co-Borrowers. Make sure you add all the income in the proper categories.

Base Employment Income:
Input the monthly base salary for yourself and any Co-Borrower. If the income is hourly calculate the monthly income by multiplying the weekly number of hours worked times 52 and divide that number by 12. If the income is weekly, calculate the monthly income by multiplying the weekly income times 52 and divide that number by 12. If the income is paid bi-monthly, multiply the bi-monthly income times two for the monthly income. Add in incomes of yourself and any Co-Borrower in the Total Income Box.

Overtime:
Calculate any monthly overtime for yourself and any Co-Borrower. Consistent overtime can be used in qualifying for a residential loan. Determine your past monthly overtime amount and probable overtime in the future when imputting overtime. You may want to review a current pay stub in determining your past overtime amount. Add the overtime for yourself and any Co-Borrower in the Total Income Box.

Bonuses:
Determine any bonuses that you and any Co-Borrower expect this year or have been paid in past years. Calculate the annual bonuses in this calendar year and divide that number by 12 for the monthly bonus amount. For example if you have been paid an annual bonus for the past two years in an amount of $20,000 and expect to receive $10,000 this year, your monthly bonus would be $833 ($20,000 + $10,000 =$30,000 -- divide $30,000 by 36 months). Generally bonuses are averaged over a two- year period. Add any bonuses for yourself and for the Co-Borrower in the Total Income Box.

Commissions:
Determine any commissions that you and any Co-Borrower expect this year or have been paid in past years. Generally, commissions are paid monthly or quarterly. If commissions are paid quarterly, semi-annually, or annually, divide the amount by 4,6,or 12 respectively. For example if you were paid a quarterly commission of $3,000, your monthly commission used on the application would be $1,000 ($3,000/3 months). Generally commissions are averaged over two-year periods. Add any commissions for yourself and any Co-Borrower in the Total Income Box.

Dividends/Interest:
Determine monthly income for yourself and any Co-Borrower that is derived from dividends and/or interest. Interest income may come from Certificates of Deposit, U.S Treasury Securities, mortgage notes, corporate bonds, mutual funds, etc. Most institutions and stock brokerage firms provide a monthly statement that indicates monthly income.

Another source to determine interest is your Federal Income Tax Return Schedule B, under Interest and Dividends. Dividends are paid by corporations to owners of their stock or from mutual funds that invest in stocks. Generally dividends are paid quarterly and you can calculate the monthly dividend amount by dividing the quarterly amount by 3. Add any dividends/interest for yourself and any Co-Borrower in the Total Income Box.

Net Rental Income:
If you or any Co-Borrower have rental property that provides monthly net income after any monthly payments and expenses are paid, input that amount. For example, if you owned a rental property where the tenants made $1,500 rental payments and your monthly expenses (payments = $900, property taxes = $100, hazard = $50, and miscellaneous expenses = $100) were $1,150, the net monthly income would be $350. Add any net rental income for yourself and any Co-Borrower in the Total Income Box.

Other:
Please input all other income in a monthly format.

Total Income:
Total all income for yourself and any Co-Borrower and input that amount. (This is done automatically).


Combined Monthly Housing Expenses:

This area reflects your present monthly housing expenses and the proposed monthly housing expenses on the loan you have requested.

Present


Rent:
If you currently are renting, indicate the monthly rental payment under Rent. If you own the property that you currently occupy, indicate each portion of your monthly housing expenses.

First Mortgage (P&I):
Input the principal and interest payments that are made to your lender every month. This amount only reflects the payment that is required according to the mortgage note. The Principal and Interest Payment can be obtained from your current lender's monthly statement or from the mortgage note. You may also call your lender for the monthly principal and interest payment.

Other Financing (P&I):
If you have secondary mortgage financing on the property, input the monthly Principle and Interest amount. Secondary mortgage financing is a junior lien to the first mortgage. This loan may have been used when you originally purchased the home and you may make monthly payments to the past seller/owner.

This loan may also be a Home Equity Loan that you obtained to do improvements on your property. Generally there will be monthly principal and interest payments or interest only payments on Secondary Financing. If you are unsure of the monthly payments, please call the entity where you make payments for information.

Hazard Insurance:
Lenders require fire or hazard insurance on the property for the loan you are requesting. Sometimes the hazard insurance policy includes homeowner's insurance as well. The policy must, at a minimum, be in an amount equal to the loan you are requesting.

Generally the hazard insurance premiums are paid annually but can be collected by the lender on a monthly basis; the lender will then make the annual premiums every year on your behalf. You can determine the hazard insurance premium by contacting your insurance agent or refer to your existing policy. Your lender may provide a monthly statement that indicates the monthly hazard insurance premium. After determining your annual premium, divide it by 12 and input that amount in the space provided.

Real Estate Taxes:
Local municipalities assess taxes on real property and collect them twice yearly (November 1st and February 1st). Sometimes the lenders collect the taxes as well as the hazard insurance on a monthly basis as a part of your monthly payment. The lender will then make the tax installment payments twice a year on your behalf.

Otherwise, the taxes are paid by the borrower directly to the tax collector. Because the taxes are part of your total housing expenses, the monthly equivalent of your property taxes must be included. You can determine your property taxes by calling the tax collector in your county, by referring to the tax amount on your title policy, or by contacting your lender. After determining your annual property taxes, divide the number by 12 and input that amount.

Mortgage Insurance:
Sometimes lenders require private mortgage insurance on loans that exceed 80% of the value of the real property. If you had obtained a loan that was 95% of the value of your property, chances are that the lender required mortgage insurance.

Sometimes the mortgage insurance is part of the monthly payment and the monthly mortgage insurance premium will be difficult to determine. You can call your lender for information on any mortgage insurance premium or review the HUD 1 (loan closing cost itemization ) that was issued when you closed your existing loan. If you determine that there is private mortgage insurance, input the monthly amount (or annual premium divided by 12).

Homeowner Association Dues:
If your property is a condominium or Planned Unit Development (PUD), there are probably monthly dues for the Homeowner Association. If you have to make payments to an association, please input the monthly amount.

Other:
If there are other fees related to your property for things such as sewer assessment or road maintenance, you need to input those monthly (or monthly equivalent fees).

Total:
The total will automatically calculate after you have input all of the categories under Existing Monthly Housing Expenses.


Proposed:


This area of section V will reflect your proposed Monthly Housing Expense. Most of the explanations regarding items that make up the monthly housing expenses can be queried from the Hypertext items. The application is set up to automatically estimate most of your proposed Monthly Housing Expenses.

First Mortgage:
The First Mortgage Principal and Interest (P&I) amount will be calculated from your previous inputs from section I.

Other Financing:
If there will be other financing, please indicate the monthly payment amount under Proposed Other Financing. Leave blank if there will be no secondary or junior lien financing.

Hazard Insurance and Property Taxes:
The hazard insurance and monthly property tax amount will be automatically calculated based on the loan requested in Section I. If you believe that these figures are in error, you may override them simply by imputting your figures.

Mortgage Insurance:
A mortgage insurance premium will be imput automatically. If you believe that the loan you are requesting is 80% or less than the value, you should enter 0 in this area.

Homeowner Association Dues:
If there is Homeowner Association Dues on the property, you need to input the monthly equivalent of the fees. Click on this area for hints on how to determine the Homeowner Association Dues.

Other:
If there are any additional monthly expenses that you consider to be a part of the Monthly Housing Expense, input those also. Click on this area for samples of Other Expenses.

Total:
The total will calculate automatically after you have input all of the catagories under Proposed Monthly Housing Expense.