Friday, April 19, 2019
8:14 pm edt
Understanding Debt-to-Income Ratio for a Mortgage
A good DTI to get approved for a mortgage
is 36%. Use these rules to calculate what you may qualify for a mortgage.
Higher DTIs could mean you’ll pay more interest or you may be denied a loan.
Debt to Income is calculated by adding your monthly debt which includes 6 months or more
of revolving credit cards, car loans, child support and school loans. You can find your credit score and debt on your Credit
Report. Credit Scores may predict your interest rate and qualifications as well.
Divide this total by your monthly income. If its below 36-43% you are ready to search for
a home at the price point that falls under 43%. Down payment plays a roll in qualifying as well.
Example: Income - $80,000 divided by 12 months equals $6,666/mo Monthly Expenses: New Mortgage
$1804.11, Revolving credit card debt $500 equals $2304.11. $2,304 divided by $6,666/mo equals 35% DTI. You are under 36%-43%.
Now find the house you qualify. $300,000 home with 5% down equals $285,000. An online mortgage calculator: https://www.mortgagecalculator.org/
In this example:
will need $15,000 for down payment and roughly around 5% for closing costs based on the morthgage amount of $285,000 - $29,250.
Give one of our team members at Outer Banks Realty Solutions to help you with finding the right home at the qualifying purchase
price. Outer Banks Realty Solutions, LLC 252-261-9003 E.H.O.