How does one qualify for HAMP? Debt to income ratio, etc

[ANTHONY6977]

someone said it has to do with 1st td MUST exceed 31% of my income? I take home approximately $4200 a month and my 1st td is 2600 piti. I have a 2nd td as well

[Evan Bedard]

someone said it has to do with 1st td MUST exceed 31% of my income? I take home approximately $4200 a month and my 1st td is 2600 piti. I have a 2nd td as well

Hello Anthony,

To qualify for HAMP your first monthly mortgage payment (PITI included) must exceed 31% of your gross monthly income. If your payment is already at or below 31% of your gross monthly income you will need to apply for a regular in-house modification..

[Maurice Bedard]

That is only one of the qualifications. Your income must also be enough to qualify for the payment after all the possible modifications are made.
With $4200 income, you qualify for a payment of about $1300(31% of gross income). This $1300 must be enough to pay principal, interest, tax, and insurance. Just assuming $500 a month for tax/ins, that would leave $800 a month to pay principal and interest. That is somewhere around a $270k loan based on the maximum term they allow of 40 yrs, and the minimum interest rate of 2%. They can 'forbear' part of your loan, up to 30% of your loan balance, which means your current loan must be under somewhere around $380k. There is another way to figure forbearance limits based on property value and loan balance that could change the numbers.

Generally speaking, with your income, if your current loan amount is less than about $380k, you should qualify, but then there is another test called the 'NPV' and that tells them if they make more money by foreclosing or by modifying your loan. If they make more money by foreclosing, they won't do the modification. If you are upside down, it is easier to pass the NPV. If you have equity, they would rather take your home, sell it, and have the cash.

And the closer you are to needing the maximum term and minimum interest rate, the tougher it is to pass the NPV test. The less you can afford to pay in a modification, the less cash the investor gets.

If your current 1st mtg is less than $270k(the lower the better), and the property is worth less than what you owe (the lower the better), you have a good shot at a HAMP mtg. But even if you don't qualify for HAMP, you could still get an in house mod because they don't have the same restrictions as HAMP. In house they don't have to make your payment 31%, it could be 40%, or more, and they can charge a higher interest rate. When you apply, if you tell them you want HAMP, they will first look at HAMP, and then look at inhouse options.

[ANTHONY6977]

okay so my infor is as follows

1st TD is $2647 piti
1st td loan amount $405,000 and yes upside down

2nd td is $500
95,000 loan amount

Income is $4200

family rent $1000 income (same property)

1800 in overall expenses


Planning on speaking to them in the next day or 2, can someone please let me know if my stats would qualify? thanks

[persistance]

Anthony, start here Making Home Affordable - Home Affordable Modifications
From your previous post, you said you received a loan mod in May/2010 so #4 makes your loan not applicable to HAMP, so sorry

[Maurice Bedard]

If you had a prior HAMP mod, you can't get another. And you need to include the rental income as part of your gross income. If you include the rent and it totals $5200, your payment would be about $1600. Depending on your escrow payment, you might qualify for HAMP if you don't have an earlier HAMP mod.You need to qualify for a $285k mtg. As long as your escrow payment is less than $740 a month, you might qualify if you pass the NPV. I would advise you don't apply through your bank until speaking to 888-995-HOPE. If you are current on your loan, you are not allowed to have very much in savings, and not earn enough to pay all your bills and have an amount left after you pay all your expenses of more than about 20% of your house payment. You will need proof of ALL your monthly expenses, and at least two months of pay stubs, and proof of the rental income. When you call HOPE, make sure you give them the same numbers you will later need to give your bank. If any of those numbers changes, it will slow things way down. With only $4200 income, I think you may not qualify, but with the extra rent income, I think you have enough, depending on your escrow payment. Plus it depends on how they count the rent. If they share the same home, they are suppose to count all of the rent as income. If it a duplex, with a seperate address, they may only count 75%. Make sure you tell them that there is no mortgage payment that is on the rental income. It would be easier if you told them that they were sharing the same home. You may need a rental agreement to prove the rent income. It would help if you showed rental income on your tax returns too.

[postnsons]

I am currently reviewing a HAMP proposal from my lender. I submitted income for the first 5 months of the year. My income is variable. My lender took the last two months of income to determine my income, which was considerably higher, and it debt to income ratio came in at 33.5% which is enough to qualify. The payment the lender is coming up with is $1153.

However, if you take my first 5 months income and compare it to the lender determined income my income is 37% less. I'm reasonably certain that I will not be able to make the payments if I agree to the schedule the lender is presenting.

If I use the first five months of income instead of the last 60 days of income, prior to meeting with the lender, my payment would come out to $727 which would be affordable.

Also, if I took the highest and lowest month, the average is the same as the 5 month average income.

[Cat Damiano]

Hi postnsons,


Welcome to the forum and thank you for joining...........

If you are self employed, then the lender will require the profit and loss, if you are salaried or w2, then the lender will require pay stubs that are not more than 90 days old;

1. 5.1.1 Wage or Salary Income
   Each wage earning borrower must provide copies of two recent pay stubs, not more than 90calendar days old at time of submission, indicating year-to-date earnings.
   A servicer may accept pay stubs that are not consecutive if, in the business judgment of theservicer, it is evident that the borrower's income has been accurately established. A servicer mayalso accept pay stubs that do not show year-to-date income, if, in its business judgment, andbased on all other documentation, the pay stubs indicate the borrower’s recurring monthlyincome.
   When two pay stubs indicate different periodic income, servicers may use year-to-date earningsto determine the average periodic income, and account for any non-periodic income reflected ineither of the pay stubs.
   The Verification Policy should describe how the servicer wil

•  Calculate income based on the frequency of payments;
•  Make adjustments when it is likely that sources of additional income (bonus,
  commissions, etc.) are not likely to continue; and
•  Utilize alternative forms of income documentation (IRS Forms 1099, 1040, W-2, and IRStax transcripts or letters from employers) when pay stubs are not available or sufficient ordo not show year-to-date income.
  
  
  5.1.2 Self-Employment Income
  Each self-employed borrower must provide his or her most recent quarterly or year-to-date profitand loss statement. Audited financial statements are not required.
  When calculating gross income for self-employed borrowers, a servicer must include theborrower’s net profit plus any salary or draw amounts that were paid to the borrower in addition tomaking allowable adjustments used in analyzing the tax returns for the business, if applicable, todecrease gross income (e.g. nonrecurring income) or to increase gross income (e.g. expenses,depreciation and depletion).
  If consistent with the Verification Policy, servicers may require up to four consecutive months ofbank statements as an alternative to obtaining a profit and loss statement or if, following receipt, itis determined that the information in the profit and loss statement is insufficient.

[postnsons]

Hi postnsons,


Welcome to the forum and thank you for joining...........

If you are self employed, then the lender will require the profit and loss, if you are salaried or w2, then the lender will require pay stubs that are not more than 90 days old;

1. 5.1.1 Wage or Salary Income
   Each wage earning borrower must provide copies of two recent pay stubs, not more than 90calendar days old at time of submission, indicating year-to-date earnings.
   A servicer may accept pay stubs that are not consecutive if, in the business judgment of theservicer, it is evident that the borrower's income has been accurately established. A servicer mayalso accept pay stubs that do not show year-to-date income, if, in its business judgment, andbased on all other documentation, the pay stubs indicate the borrower’s recurring monthlyincome.
   When two pay stubs indicate different periodic income, servicers may use year-to-date earningsto determine the average periodic income, and account for any non-periodic income reflected ineither of the pay stubs.
   The Verification Policy should describe how the servicer wil

•  Calculate income based on the frequency of payments;
•  Make adjustments when it is likely that sources of additional income (bonus,
  commissions, etc.) are not likely to continue; and
•  Utilize alternative forms of income documentation (IRS Forms 1099, 1040, W-2, and IRStax transcripts or letters from employers) when pay stubs are not available or sufficient ordo not show year-to-date income.
  
  
  5.1.2 Self-Employment Income
  Each self-employed borrower must provide his or her most recent quarterly or year-to-date profitand loss statement. Audited financial statements are not required.
  When calculating gross income for self-employed borrowers, a servicer must include theborrower’s net profit plus any salary or draw amounts that were paid to the borrower in addition tomaking allowable adjustments used in analyzing the tax returns for the business, if applicable, todecrease gross income (e.g. nonrecurring income) or to increase gross income (e.g. expenses,depreciation and depletion).
  If consistent with the Verification Policy, servicers may require up to four consecutive months ofbank statements as an alternative to obtaining a profit and loss statement or if, following receipt, itis determined that the information in the profit and loss statement is insufficient.

Thank you for your quick response. I'm not self employed, my income simply fluctuates to varying degrees. This will assist me in asking questions as to how the lender determined my income.

[Cat Damiano]

That is good, keep us posted on how it goes.