To determine your ability to pay for a mortgage and qualify for our program, Habitat considers your income (both past and present) and the amount you owe on other debts and your payment history. 

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INCOME 

Habitat Tuscaloosa will use two income calculations when reviewing your application.

 

First, your household income will be calculated. In order to qualify for Habitat’s Path to Homeownership your household income cannot exceed 80% of Area Median Income as published by HUD (updated annually). Household income will include income received by all household members and is calculated before any taxes or deductions.​

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For the second income calculation, Habitat will calculate the income that will be used to repay the mortgage. Typically, this is income received by the applicant and co-applicant (if applicable).

 

Most of the homes Habitat builds are 3-bedroom/2 bathroom homes and 2 bedroom/2 bathroom homes. Larger homes will have a higher monthly payment and therefore a higher minimum monthly income.

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The estimated house payment cannot be more 28% of the income used to qualify for the mortgage.

 

TYPES OF INCOME YOU CAN USE TO QUALIFY 

• Income from regular employment (not seasonal or temporary income)

• Self-employment income that is consistent and is claimed on your tax returns

• Social Security, Social Security Disability, SSI, etc. that is expected to continue for at least three (3) years

• Retirement, pension, etc.

• Child support, alimony, etc. that is consistent and is expected to continue for at least three (3) years

 

 

CREDIT AND PAYMENT

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If your income meets our guidelines, Habitat will review your current and past debts and your payment history. Habitat for Humanity does NOT have a minimum credit score, but we will review your credit report.

 

Habitat is looking at the following:

• If you listed all your debts on your application

• How much you owe to other lenders

• Your current and past payment history

• How long your accounts have been open

• If you have filed bankruptcy or have any collections, judgements or liens

• The minimum required payments on you debt and your estimated mortgage payment cannot exceed 40% of your income.

 

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TYPES OF DEBTS THAT ARE INCLUDED IN YOUR DEBT-TO-INCOME RATIO

• Estimated house payment (including property taxes and homeowner’s insurance)

• Car payment(s)

• Min. payments on credit cards, store cards

• Personal loans, finance company loans, payday loans, etc.

• Student loans (even those in deferment or forbearance)

• Loans you have co-signed for others (even if someone else is making the payments)​​​

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DTI Example (illustrated below):

Family A has an anticipated monthly house payment (mortgage) of $750.

Other monthly debts include a car loan payment of $300, a Visa minimum payment of $35, and a student loan payment of $100, for a total of $1,185 in monthly debt.

 

 

To calculate the family’s debt-to-income ratio (DTI), we add up all of the minimum monthly debt payments and divide that total by the household’s monthly gross income (the total monthly income before taxes are deducted). Multiply that answer by 100 to convert to a percentage.

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