Assets and Debt

The lender will look carefully at what you make and what your current debt is when deciding what you can afford and what they will lend you. This is basically a calculation of how much you make and how much you spend. The amount of debt you carry is a very important figure that the lender uses when calculating the amount of money they believe you can afford and the amount they will lend you. On the positive side the lender will also use figures including savings. The first number to calculate is your gross yearly income. Lenders generally will loan two to two and half times your gross yearly income, though this is not a hard and fast rule, so be careful when using this as a guide. If your spouse or domestic partner is also earning money, add their yearly gross income to yours to calculate the total gross income figure. If you have any other sources of income you should include them also. Some of these sources may be:

• Bonuses
• Interest from savings
• Alimony
• Child support

You may be asked by the lending institution to provide a proof that you will be receiving the alimony or support for the next three years, so be prepared to do that. Add all the figures up. This gives your yearly gross income. Divide this figure by 12 to get your monthly gross income. If you are self-employed, you should be in the same position as somebody who is not self-employed. For example, if your business grossed $250,000 but you paid taxes on $75,000, the lender will consider the $75,000 as your gross income. The lender will probably take an average from the past two years or more.