A big part of applying and qualifying for a Bank of America loan modification is meeting the debt ratio requirement.  This may be something you have never heard of before, but when it comes to loan review, this calculation is one of the most important things the bank will look at.  What is debt ratio and how do you know if your ratio is acceptable?  Here is the basic formula to figure it out.

First of all, a Bank of America loan modification will require that you complete a financial statement detailing your household monthly gross income and monthly expenses.  The bank will review this statement and based on how you complete it, you will either be approved or denied.  So, it is critical to understand just what they are looking for so that you can avoid any costly mistakes.  Your debt ratio is calculated using a formula like this:

Bank of America Debt Ratio Calculation:

Total monthly expenses DIVIDED by total monthly Gross income = debt ratio percentage

For Example:  Total monthly expenses equal $2800 and total monthly gross income equal $5200

2800 divided by 5200 = 53%  That would be your own debt ratio.  So what is required for approval for a Bank of America ?  That depends on the loan workout program you are requesting-there are a couple of options.

Federal Plan

The Bank of America debt ratio requirement for the government plan called HAMP is standard and mandated by the Treasury Department.  You must be able to meet these standard guidelines in order to be offered this very beneficial loan modification.  If you qualify for this loan workout, your interest rate could be reduced to as low as 2%, your loan term extended to 40 years and some principal balance deferred or even forgiven.

The first approval guideline under Bank of America loan modification HAMP is that your current mortgage payment-including taxes & insurance and any HOA dues-equal MORE than 31% of your gross monthly income.  So if your current debt ratio is 31% or lower-you won’t qualify.  If however your ratio is over 31% then you have met the initial criteria for review.

Work on your budget now

Another loan modification option could be one of Bank of America’s proprietary or in house plans.  These are custom tailored for each borrower and these options can vary a great deal.  Generally speaking, the goal will be to get you a new payment that equals approximately 45% of your gross monthly income.  So if you do not qualify for a government HAMP option, you could be offered one of these other plans.

TIP:  Know how to calculate and meet the Bank of America debt ratio requirements if you want to have the best chance of success.  If you are confused about how to properly prepare your financial statement, then you can use a software program designed just to help homeowners with completing their budget correctly.  The Loan Mod Quick App software takes the guess work out of making certain that your figures are accurate.  Simply input your own income and expenses and all the calculations are done automatically.  Most importantly, you will see immediately if you need to make any adjustments to your figures in order to pass the approval guidelines.

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