Q. Hey Moe! I have been trying to get mortgage assistance from Chase for the past 8 months with no luck. They keep saying that my debt to income ratios are too high. I was wondering if you knew what Chase requires as far as ratios go in order to obtain a loan modification?
A. In order to find out a monthly payment that is ideal for a particular individual, Chase will first determine their debt-to-income ratios. They often will ask for your total gross income in order to properly figure out your true net income. This is your entire income that your receive prior to any tax deductions. Once your income has been added up it’s time to add up any monthly debt payments that are required. These include your minimum monthly payments on all your credit cards, car installments, insurance payments, property taxes as well as the new desired payment that you want to adjust to. Do not include any utilities such as water, electric and cable TV bills.
Many borrowers assume that since they ask from gross income that they calculate your mortgage based on gross and this is not true. They ask for your gross so they can figure out your net by underwriting your file. Mortgage servicers understand that most all borrowers are not loan officers or mortgage bankers and that is why they do not ask you for net income, but gross.
Once you have both figures (income & debts), deduct your total monthly obligations from your total net income. The figure that you end up with is the debt-to-income ratio.
To find out the likelihood of your being approved by Chase or any other financial institution, is to find out your true debt/income ratio based on your net income. If the figure is less than your gross monthly income or if it is 40-50% or less of your total income then you have a good chance for being approved for a loan modification. Depending on your situation banks can be lenient in this figure. For example if you have been sick for a while and have recently recovered to be well enough to work, then banks like Chase may consider a debt-to-income ratio that hovers around 45-50% of your net income for loan modification approval.
Before assessing your situation it is best to discuss matters with an actual loan modification expert from a HUD approved non-profit housing counselor like www.NACA.com or www.995hope.org, 888-995-hope. You can also join our Chase mortgage forum and share your story with thousands of other homeowners that are also trying to get a loan modification. That way you will get a better idea for their criteria in approving such modifications and all your questions can be addressed up front.