You want to apply for a mortgage loan to finance a new home. But you suffered a serious injury or illness that has kept you from working. In this case, you can potentially qualify for a mortgage loan if you're on disability assistance -- but you'll have to prove to your mortgage lender that you make enough money each month to afford a mortgage loan payment.
When determining whether borrowers qualify for a mortgage loan, lenders look carefully at the monthly income these borrowers generate. In many cases, the majority of borrowers' income comes from their monthly salary. But this isn't always the case. Lenders consider any regular monthly income stream when determining borrowers' monthly income. This includes such income as rental payments, alimony, dividends, Social Security payments and regular disability payments.
Front-End Debt-to-Income Ratio
Once lenders have determined your gross monthly income --- your income before any taxes or other payments are taken out -- they'll calculate your front-end debt-to-income ratio. Lenders generally want their borrowers' total monthly housing payments -- a total that includes a mortgage payment's principal, taxes and insurance -- to equal no more than 28 percent of their monthly income from all sources, including disability payments.
Back-End Debt-to-Income Ratio
Lenders also use your gross monthly income to determine your back-end ratio. Lenders want your total monthly debts, which could include everything from your estimated new monthly mortgage payment to your car-loan payments and minimum required monthly credit-card payments -- to equal no more than 36 percent of your gross monthly income.
If your gross monthly income, calculated from monthly income streams (including your regular disability payments), puts you on the favorable end of these two debt-to-income ratios, your chances of receiving approval for a mortgage loan will increase. Lenders, though, also consider your three-digit credit score when determining whether to approve you for a mortgage loan.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.