Your Lake of the Ozarks Mortgage Lender: debt-to-income ratio

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!

For Lake area news, resources and tips on financial services, please

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct: (573) 746-7211

Cell: (573) 216-7258

e-Fax: (866) 397-0318

Email: mlasson@fsbfinancial.com

Website: www.YourLakeLoan.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

Friday, August 25, 2017

How Your Debt Affects Your Mortgage

When you're looking into financing a home at the Lake of the Ozarks, you've got several different factors that have to be reviewed. You've surely heard that your credit score can impact your chances at getting approved for a mortgage, but that number alone is not the only thing a Lake of the Ozarks mortgage lender will check. Keep reading to learn how your debt, and more specifically your debt-to-income ratio, can affect your mortgage.

Debt-to-Income Ratio

To figure out your debt-to-income ratio, add up all your monthly payments including credit cards, personal loans and/or a current mortgage loan. Then divide that number by your gross monthly income. That number is your debt-to-income ratio. That ratio helps the lender determine if you can afford another debt payment each month, and if so, how much of a monthly payment. An ideal debt-to-income ratio would be 25% or less. If your debt-to-income ratio rises above 43%, you may have a difficult time qualifying for a mortgage at the Lake of the Ozarks.

Types of Debt: Secured vs. Unsecured

While different types of debt can actually boost your credit score, and show that you are reliable in paying those debts back, over borrowing can hurt your chances at qualifying for a mortgage. First of all, there are two main types of debt: secured and unsecured. A debt that is secured means the debt is balanced against something that could get taken away, such as a house or a vehicle. Unsecured debt is the other stuff like credit card debt and student loans.

Unsecured Debt

While credit card debt does not look good, especially if your credit utilization is high, student loans aren't necessarily bad if you've paid your bills on time. Student loans can actually help raise your score. Other loans, like personal loans or credit card debt, even when paid on time, can actually lower your score. Although student loans can have a positive effect on your credit score, they're still added into your debt-to-income ratio, so large loan balances can make it difficult to qualify for a mortgage.

Secured Debt

Auto loans are a secured debt because the lender can repossess the car if you don't pay your bill. In some cases, auto loans can raise your credit score by diversifying the type of debts you have. Also, due to the fact that auto loans are harder to obtain than credit cards, some lenders may view auto loan debt favorably. Mortgage payments also look good on your credit report, as long as they've been paid on time. If you were ever late on a payment, that looks like a risk to your new lender.

If you're concerned with how your debt will affect your chances of obtaining a home loan at the Lake of the Ozarks, give me a call at 573-746-7211. I'll discuss your questions and concerns, go over your financing options, offer competitive interest rates and back it up with the first-class service you deserve. Together, we'll work towards getting you into that dream home of yours!

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