One of the largest challenges I face as a home loan lender is getting you qualified for the loan amount you want to purchase that home of your dreams.
One of the reasons you’ll see real estate agents ask you to get pre-approved is because they know that there’s a lot of factors that come in to play when getting you approved for the loan amount you desire.
Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This ratio is a major determining factor of how much loan you will qualify for.
Almost all mortgage programs have guidelines in place that set the maximum debt-to-income ratio that will be allowed for funding.
When considering home loan programs like my 100% financing options in Utah, your debt-to-income plays a significant role. Some loan programs are very strict, while others, like the 3.5% down payment FHA mortgage, are a bit more relaxed with debt-to-income ratios allowed.
Limiting Your Overall Debt
Depending on your income, consider lowering your overall debt when possible. Any monthly debt that you have can and will be used in your debt-to-income ratio.
Debts you should consider include credit cards, student loans, auto payments, mandatory child support payments, personal loans, other mortgages and more.
Consider reviewing your credit report to discover debt that you may have forgotten about in your debt factoring. Other debts that do not appear on your credit report should also be factored in.
Calculating Your Debt-to-Income Ratio
To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.
As an example, if you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts, your monthly debt payments are $2,000. ($1500 + $100 + $400 = $2,000.) If your gross monthly income is $6,000, then your debt-to-income ratio is 33 percent. ($2,000 is 33% of $6,000.)
Let Scott Buehler Do It For You!
I’m here to help guide you through the process. I can do debt-to-income factoring for all borrowers in my sleep and I’m happy to lend you a helping hand (pun intended).
Take my 60-second questionnaire. From there, I’ll send you a text to arrange a phone call to discuss your home loan lending options.