103 - The yMORE Group at NEXA Mortgage

The Building Blocks

Four major parts of your financial review

Each part answers a different question about your ability to qualify for and repay the proposed mortgage.

Credit

How you have managed borrowed money and monthly obligations over time.

Income

The stable, verifiable income that may be used to calculate your ability to repay the loan.

Assets

The documented funds available for closing, reserves and other transaction requirements.

Debt

The recurring obligations that must be paid along with the proposed housing payment.

More Than a Score

Understanding your credit review

Your credit report and credit score are related, but they are not the same thing. A score summarizes certain information from a credit report, while the report shows the underlying account and payment history.

What may appear on a credit report

Mortgage credit reports may include information from the three nationwide credit reporting companies.

Credit cards, installment loans and other reported accounts
Account balances and required monthly payments
Payment history and reported late payments
Collections, charge-offs and certain public record information
Recent credit inquiries and newly opened accounts

What a lender may evaluate

The score matters, but it is only one piece of the credit review.

The credit score used for the applicable loan program
Recent and historical payment patterns
Revolving balances and available credit
The age and type of reported accounts
Major credit events and the time since they occurred

The score you see may not be the score used for your mortgage.

Different scoring models, credit-report data and calculation dates can produce different scores. A score provided by a bank, credit card company or monitoring application may not match the mortgage-related score obtained by a lender.

Income That Can Be Documented

How qualifying income is reviewed

The amount deposited into your bank account is not automatically the amount used for mortgage qualification. A lender must determine which income can be documented and calculated under the selected program.

Verifiable

The income must generally be supported by acceptable records such as pay statements, tax documents, account statements or third-party verification.

Stable

The history, source and pattern of the income may be reviewed to determine a reasonable qualifying amount.

Expected to continue

Income generally must be reasonably expected to remain available for the period required by the applicable loan guidelines.

Salary or fixed hourly employment income

Variable hourly income or fluctuating work schedules

Overtime, bonus, commission or tip income

Self-employment or business income

Retirement, pension or Social Security income

Disability, military or other eligible income

Rental or investment-related income

Court-ordered support income when the borrower chooses to use it

Earning income does not always mean the full amount can be used.

Variable income may need to be averaged. Business income may be calculated after eligible expenses. Newly started, declining, temporary or insufficiently documented income may be treated differently under the applicable guidelines.

Documented Money for the Transaction

Assets and available funds

Lenders may review your accounts to confirm that you have enough eligible funds for the transaction and to document where those funds came from.

Cash to close

Funds needed for the down payment, closing costs, prepaid expenses and other required amounts.

Required reserves

Additional eligible funds that remain available after closing when reserves are required.

Financial strength

Assets may also provide additional context about the overall financial profile, depending on the program.

Checking and savings accounts

Eligible investment and brokerage accounts

Eligible retirement funds

Documented gift funds when permitted

Proceeds from the documented sale of property or another eligible asset

Earnest money already paid toward the transaction

Avoid moving money around without first asking.

Large deposits, cash deposits, newly opened accounts and transfers between accounts may require additional documentation. Keep statements, transfer records, deposit receipts and evidence showing the original source of the funds.

Comparing Income With Obligations

What is a debt-to-income ratio?

Your debt-to-income ratio, usually called DTI, compares applicable monthly debt payments with your qualifying gross monthly income.

Monthly Debt Payments Proposed housing payment plus applicable recurring obligations

Gross Monthly Income Eligible qualifying income before taxes and payroll deductions

Obligations That May Be Included

The proposed mortgage payment, taxes, insurance and applicable dues
Credit card minimum payments
Auto, personal and installment loan payments
Student loan obligations
Other mortgages and financed properties
Court-ordered support obligations
Certain lease or co-signed obligations

Expenses That Still Matter to Your Budget

Utilities and routine household expenses
Groceries, fuel and transportation costs
Childcare and education expenses
Medical, insurance and prescription costs
Savings and retirement contributions
Travel, entertainment and personal spending
Future repairs and home maintenance

There is no single DTI limit that applies to every mortgage.

Acceptable ratios vary by loan program, automated underwriting findings, credit profile, assets, property and lender requirements. A ratio that works for one borrower or program may not work for another.

Be Prepared to Verify the Details

Common financial documents

Your exact list will depend on how you earn income, where your funds are held and which loan program you use.

Recent pay statements and employer information

W-2 forms or other applicable wage records

Personal and business tax returns when required

Year-to-date profit-and-loss statements or other business records when applicable

Complete bank and investment account statements

Retirement or pension documentation

Social Security, disability or other benefit award documentation

Gift documentation and proof of transfer when applicable

Statements for mortgages, loans or obligations that need clarification

Explanations and supporting records for unusual deposits or credit activity

Additional or updated documents may be requested throughout the process. An updated request does not necessarily mean there is a problem; lenders must verify that the information remains accurate before closing.

Keep Your Loan Officer Informed

Changes that may affect qualification

Credit, income, assets and debts may be reviewed again before closing. Ask before making a major financial change.

Opening new credit

A new account may add a monthly obligation, change your credit profile or require additional documentation.

Increasing balances

Higher credit card or loan balances may change minimum payments, available funds and credit scores.

Changing employment

A new job, reduced hours or a change in pay structure may affect how qualifying income is calculated.

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Moving large amounts of money

Transfers and deposits can create additional sourcing requirements if the transaction cannot be clearly followed.

Co-signing for someone

A newly co-signed obligation may be treated as your debt even when another person plans to make the payment.

Closing accounts

Closing a credit or bank account can affect available credit, credit history or documented funds.

Alabama Homebuyer Note

The actual property can change your numbers

A preapproval may begin with an estimated housing payment. Once you select an Alabama property, the projected payment must be updated using information related to that specific home and location.

Property taxes can vary by county, city, exemptions and the property's assessed information.
Homeowners insurance can vary based on location, age, condition, roof, construction and coverage.
Flood insurance may be required when the property is located in an applicable flood zone.
Homeowners association dues and certain property assessments may be included in qualification.
Manufactured homes, condominiums, multiple-unit properties and acreage may have additional program requirements.
A higher property payment can increase DTI even when the purchase price remains within the original preapproval amount.

Common Questions

Credit, income, asset and debt FAQs

Is the highest borrower credit score used when two people apply?

Not necessarily. The credit score used for loan qualification and pricing depends on the program and applicable lender guidelines. Adding a borrower does not automatically mean only the highest score controls the transaction.

Does a high income guarantee mortgage approval?

No. The income must be eligible and documentable, and the lender must also evaluate credit, debts, assets, the property and all other applicable requirements.

Can overtime or bonus income be used?

It may be usable when the history, documentation and expected continuation satisfy the applicable program. The amount used may be based on an average rather than the most recent payment.

Why does self-employed income look lower than gross business revenue?

Gross business receipts are not the same as qualifying personal income. Applicable expenses, ownership, tax returns and other financial records may be considered when calculating usable income.

Can cash I have saved at home be used for closing?

Mortgage programs generally require funds used for closing to come from an eligible, verifiable source. Undocumented cash can be difficult or impossible to use. Discuss the situation before depositing it into an account.

Does paying off a debt always increase how much I qualify for?

Not always. The payment, remaining term, source of payoff funds, credit effect and applicable program rules must be reviewed. Paying off a debt can also reduce the funds available for closing or reserves.

Can gift funds be used for the down payment?

Many programs permit eligible gift funds, but the acceptable donor, required borrower contribution, documentation and transfer process vary. The gift must comply with the selected program.

Do I need to disclose debts that are not on my credit report?

Yes. The mortgage application requires complete and accurate information. Certain obligations may need to be considered even when they do not appear on the credit report.

Credit, Income, Assets and Debt

Mortgage qualification is not based on one number.