Your Lake of the Ozarks Mortgage Lender: FAQs About Your Debt to Income Ratio When Buying a Home

Thursday, August 29, 2019

FAQs About Your Debt to Income Ratio When Buying a Home

When buying a home, several factors can play a role in the type of loan you qualify for, the interest rate you receive, and if you are approved for the loan, to begin with. Debt-to-income ratios are one of the factors that can play a huge role in your Lake of the Ozarks mortgage, so we’re going to cover a few frequently asked questions about them for you.

FAQs About DTI

Q: Why is debt-to-income important?
A: Your lender will use the debt-to-income ratio as a way to measure your ability to manage the payments you make each month, and repay the money you have borrowed.

Q: What sources of income are considered?
A: Typically these are considered:

Wages
Salaries
Commissions & Bonuses
Pension
Social Security
Child Support & Alimony
Any other additional income

Q: What monthly payments are included in the debt-to-income ratio?
A:

Mortgage payments
Real estate taxes
Home owner’s insurance
Home Owner Association Dues
Student loan payments
Minimum monthly credit card payments
Timeshare payments
Loan payments
Child support payment
Alimony payment
Any co-signed loan payments

Q: What payment is used for my credit card debts, the minimum payment required or what I actually pay monthly?
A: Typically, your lender will use the minimum monthly payment that is reported on your credit report.

Q: What is considered a good debt-to-income ratio?
A: Each lender is going to consider a different ratio based on the size, purpose, and type of loan that you are applying for. As a general rule, most lenders like to see a DTI below 45%.

Q: What is the formula for calculating my debt-to-income ratio?
A: It is calculated by dividing your total recurring monthly debt by your gross monthly income.

Q: How does my debt-to-income ratio affect my ability to get a loan?
A: Lenders will calculate your DTI to ensure you can afford to take on an additional payment. A low debt-to-income ratio reflects a good balance between your income and debt.

Are You Ready to Buy a Home?

As we move out of the summer season and into the fall season, we can’t affirm enough what a wonderful time it is to buy a home at the Lake of the Ozarks. If you have been dreaming about buying a home, it’s time to apply. Interest rates are statistically lower than they have been, and Team Lasson is ready to assist. Visit our website to submit your application and get started!

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