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Generally, when most borrowers indicate that they will not qualify for a loan, their reference is to the adequacy of income, or a high income-to-debt ration.

The lender’s assessment of risk is measured basically by determining whether the borrower has and adequate amount of stable income to support the mortgage payment and other financial obligations.  The desirable ratios will vary slightly depending on the loan type.  For example, on an FHA-insured mortgage or a VA guaranteed loan, the ratios are 29% / 41%.  ON a conventional loan, the ratios are 28% / 38%.  The higher the ratios, the greater the lender’s risk which reduces the borrower’s chance for approval.


Another key factor of prime consideration to lenders is the source and adequacy of the borrower’s funds to close the mortgage.  Borrowers are prohibited from borrowing monies to close on a mortgage without full disclosure of these intentions to the lender. A minimum investment of earnest money is required on all mortgages.  Acceptable sources of earnest monies include savings and checking accounts, gifts from relatives, savings bonds, employer relocation pay, net proceeds from the sale of a previous home, etc.  During the loan application process, the lender processing the loan application will request the borrower’s most recent two months of bank statements to verify funds available for closing.  Bank statements can also be used with the VOE to determine the borrower’s ability to save any additional money needed to close the loan.

The lender will also send to the institutions designated by the borrower a “Verification of Deposit” (VOD).  The borrower will be asked to sign the form authorizing the repository to release this information to a third party, the lender. 

As with the VOE, this form cannot be hand carried to the depository by the borrower or their real estate agent.  It should be pointed out, that in some instances, lending institutions have developed an  Information Disclosure Authorization form that you may be asked to sign during the initial interview.  The authorization form is sent to employers, banks, landlords, etc.  Instead of having you sign several VOE’s or VOD’s.  The form contains the same authorization to release the information to the lender.

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Table of Contents | Homebuyer Course Start Page | Find A Realtor | Budgeting To Buy a Home | Neighborhoods | Find Your First House | Inspect Before You Buy | Shop For a Mortgage Loan | Mortgage Home Loan Process | Credit Score and Credit Report | Home Mortgage Loan Closing | Being a Home Owner

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Edited and suplimented by Mory Brenner, Esq. For more information read our terms of use and privacy policy.