Maybe you’ve heard the expert advice that your debt to income
ratio shouldn’t be more than 36 percent of your total income.
But do you truly know what that means, and how lenders will look
at your financial history in order to decide whether or not to
extend you a mortgage? If you need help figuring out your debt
to income ratio, simply follow the guidelines below and soon
you’ll know whether or not you’re in a position to apply for a
mortgage loan.
Your debt to income ratio is the amount of monthly debt you pay
out in contrast to how much income you have coming in. Start by
figuring the easy part—your income. If you are on a structured
paycheck, then it will be easy—simply calculate your monthly
salary. If you work on a commission or other type of varying
income, total your last six month’s earnings and divide by six.
Now you will need to figure your monthly debt. You should total
your car payment, credit card payments (use the minimum amount
payments for this calculation, even if you pay more), any other
monthly debt—such as child support payments—along with the
estimated amount of your new mortgage payment.
Now, take the total of your debt payments and divide it by your
income and you will have your debt to income ratio. Most lenders
will want to see no higher than a 36 percent debt to income
ratio, although there are a few exceptions.
If you find that your debt to income ratio is so high that you
may not be able to quality for a mortgage, you should try to pay
down some of it before applying for your loan. This will not
only better your chances for a mortgage loan, but it will also
ensure that you quality for one with better interest rates and
terms.
About Author :
To see a list of recommended mortgage loan companies online,
visit this page: www.abcloa
nguide.com/mortgageloans.shtml - Carrie Reeder is the owner
of ABC Loan Guide. It is an informational loan website, with
informative articles and the latest finance news.
