The Mortgage Minute – Debt To Income Ratio

In this week’s The Mortgage Minute the topic is  Debt To Income Ratio.

A debt to income ratio is the percentage of your gross qualifying income that is going to go towards debt repayment. Included in that debt to income ratio will be your new mortgage payment, any debts that are showing up on your credit report as well
as debts that you are required to disclose to us such as alimony, child support, maybe tax repayment agreement.

Let’s take
a look at a couple of examples of Debt To Income Ratio calculations.

Let’s say the us to make your new mortgage payments going to be $2200 also month and you have $100 in credit cards
plus a car payment of $500.
For income, you have your base salary of $5000 a month plus child support of $500.
That would mean that you’re debt to income ratio is 50.9%

Let’s take a look at another example.
You just got a big raise and your new salary gives you monthly income of $7425 a month.
You have one student loan with a
payment of $125 plus your car payment of $525.

If the loan program you’re applying for allows for maximum 45% debt-to-income ratio, after your debts are taken into
consideration, that would mean that you would have $2691.25 left to apply towards a new mortgage payment.

The maximum debt-to-income ratio varies
by loan program. Some require a debt-to-income ratio as low as 40% and others you can go into the mid 50’s. It all depends on your situation, the overall picture of your transaction, and course, the loan program
If you have any more questions about debt-to-income ratios or if you’re ready to start the pre-approval process by all means send me an email, give me a call, or shoot me a text. I’ll be happy to help.
Thank you for checking out this week’s The Mortgage Minute. Until next time.