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How to find the right HAMP monthly mortgage payment ratio

Monthly mortgage payment ratio explained

Before 2008, HAMP would have been assumed to be short for clothes hamper.  Or maybe something in a song this gentleman might perform to.  Unfortunately post 2008 we have had to become familiar with HAMP, HAFA and and a bunch of other related terms and obscure acronyms.   The “monthly mortgage payment ratio” is something you want to know and understand if the phrase “save my home” is on your mind.

The monthly mortgage payment ratio expresses the relationship between your housing expense and income. It has also been called the “housing to income ratio” and even the “front end ratio.”

Of course being a ratio it consists of two parts:

1) PITIA first mortgage payment which is divided by

2) Gross income

hamp monthly payment calculator

All these calculations might make you feel like you are using a abacus. Feel free to leave a comment here if you have a question.

PITIA?  I have worked in real estate and mortgages for 10 years and for some reason missed the PITIA.  I knew intimately PITI but not PITIA.  That stands for Principle, Interest, Taxes, Insurance and Association (as in condo or homeowners association).  So when calculating the payment which is needed in order to figure out the “monthly mortgage payment ratio” you need to include your association dues in that payment.  For most applicable people adding in the association dues will help them to get a better overall HAMP payment arrangement from their lender.

To calculate gross income you should use this HAMP worksheet to make sure you are including eligible incomes.  According to HAMP supplemental directive non-borrower income should be included by servicers in the monthly gross income figure if it is VOLUNTARILY provided by the borrower and if, in the servicer’s business judgment, that the income reasonably can continue to be relied upon to support the mortgage payment. Non-borrower household income included in the monthly gross income must be documented and verified by the servicer using the same standards for verifying a borrower’s income.  It is important when deciding whether to include this optional extra income that you consider if including this income will put you under the 31% payment to income ratio.  If it does then you will be disqualified from a HAMP modification.
There is incentive to show a lower income because then the modification waterfall can be applied to lower you payment to a 31% of that lower income.  However you to be careful. You may need to include other household income not directly paid to a borrower of the loan in order to meet the minimum amount necessary to pass the Net Present Value (NPV) test.  I will discuss the net present value test in more detail however one unfortunate problem with that test is that different lenders have discretion in how this test is applied.  So you need to make sure that you don’t show a gross household your income so low that a corresponding HAMP eligible payment would cause the NPV test to fail.

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Andy Morris is an Ohio real estate broker with an expertise in selling homes on a short sale. If your Ohio home is heading towards foreclosure or you owe more than your property is worth, please call Andy at 888-4-STOP-IT to see if you qualify for a short sale with your lender. Are you not in the North Eastern Ohio area? His team can negotiate short sales across the United States.

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