Qualifying buyers - Posted by Bob(MD)

Posted by Sean on March 22, 1999 at 17:31:30:

Well, if it’s just what YOU think then you can come up with your own idea. Personally I figure if someone can pay the rent on the unit they can probably buy it since a) It’s cheaper to own than to rent and b) Part of the money is tax deductible.

If, however, they are going to go through a conventional lender they are going to be confronted with percentages – the most common being 28 and 8 (sometimes expressed as 28 and 36). Basically no conventional lender is going to want 28% or more of your gross income going to pay for the house. In addition if you are paying more than 8% of your income towards other things (like credit cards, car payments and other debt) they are going to get nervous. For every 1 percent that you pay beyond 8 percent they are going to deduct 1 percent from the maximum 28 percent that they are willing to have you pay.

The rule of thumb in renting is the person should make triple the rent. So if they’re trying to rent a $650 residence they should be grossing at least $1,950 a month.

Qualifying buyers - Posted by Bob(MD)

Posted by Bob(MD) on March 22, 1999 at 08:31:49:

If I am selling a house on a lease option or owner financing, or even if the buyer is obtaining a new bank loan, how do I determine during the screening process, if the buyer’s income is sufficient to purchase the house I am selling? I know that lenders have some kind of ratio but I just don’t know what it is. I am just trying to get all my ducks in a row before I venture out to try to sell a couple of houses that I have rehabbed.


Re: Qualifying buyers - Posted by Karl Grube

Posted by Karl Grube on March 22, 1999 at 18:49:30:

Use the Ratio of Debt to Income. Should equal 35% or less. $100,000 income … $35,000 debt or less. I always insist on two years Federal Income Tax Returns … if they refuse … move on to the next buyer! Of course, get three financial references such as a local banker, car dealership financing, or credit union. … Karl Grube Ann Arbor, MI