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.
To view our recommended sources for home mortgage loans, visit: Recommended Mortgage Lenders Online.
Carrie Reeder is the owner of ABC Loan Guide, an informational website with articles and the latest news about various types of loans.
Fixed Rate Mortgages: These loans have a fixed rate of... Read More
Mortgages are easy as long as you understand them well.... Read More
Availability of Home loans is in full bloom. They are... Read More
You can buy a home with a bad credit record;... Read More
When applying for a mortgage loan when you have a... Read More
As common as mortgages are, there are a surprisingly large... Read More
The housing market has exploded, with home prices rising beyond... Read More
When you consider that the average home owner will pay... Read More
There are several reasons that might make someone consider refinancing... Read More
When trying to obtain the best mortgage rate compare offers... Read More
In recent years, the mortgage industry has introduced dozens of... Read More
What is a "Reverse Mortgage?"Also known as a Home Equity... Read More
As loan officers, the word "lead" is by far one... Read More
Home equity loans give individuals a tool to extend their... Read More
What is a Fixed-To-Adjustable Rate Mortgage?This type of mortgage offers... Read More
You bought a house and you were promoted to the... Read More
Every individual needs a home and every home needs an... Read More
Do you know what it takes to qualify for mortgage... Read More
Asking yourself, "Is a home equity loan right for me?"... Read More
Buying a Home for the first time can be a... Read More
Before you go looking at houses, you'll need to find... Read More
Home Equity Loan vs. 401(K) LoanYou've finally decided to add... Read More
You have probably received refinancing offers in the mail or... Read More
"Own your home free and clear in 3 to 4... Read More
Man has been known for continually simplifying things in his... Read More
Obtaining a home loan is arguably the most expensive transaction... Read More
A quickly growing trend in lending is the online homeowner... Read More
Mortgage advice overwhelming you? Many people get advice from everyone... Read More
How does an ARM work.The borrowers interest rate is determined... Read More
You might be wanting to look into bad credit home... Read More
When looking for a mortgage to meet your needs, consider... Read More
In previous decades, when a borrower missed a payment on... Read More
Applying for a home loan can be overwhelming. You will... Read More
Current economic scene has hinted towards a fall in the... Read More
Applying online for a mortgage is very fast and easy.... Read More
In many ways a commercial mortgage is just like a... Read More
Since the demise of the stock market in 2000, the... Read More
Home equity loans are a popular way for homeowners to... Read More
Buying and financing a home today can be overwhelming. Here... Read More
If you have home improvements that you'd like to see... Read More
Refinancing lenders seems to hold all the cards. They have... Read More
There are several reasons that might make someone consider refinancing... Read More
Financing your new home loan online can save you time... Read More
There was a time that seems like decades ago when... Read More
Imagine this: you've found the perfect house, and feel lucky... Read More
Customers who opt for an interest only mortgage, and feel... Read More
The first time you purchase a home is an exciting... Read More
Using a home equity loan really depends on what your... Read More
Before you borrow money on your home's equity, think twice... Read More
Happy New Year. Make a difference this year. "Pay it... Read More
Why is it that some homes sit on the market... Read More
Before you go looking at houses, you'll need to find... Read More
Refinance home loan lenders are eager to lend money to... Read More
When you're self employed you have numerous advantages. As you... Read More
Buying a home vs. renting is a big decision that... Read More
Owning your dream home need not just be a dream.... Read More
At some point as you're writing out your rent check,... Read More
If you have bad credit history and are looking to... Read More
Outlined below is a useful guide to flexible mortgages. Flexible... Read More
Have you heard about or been interested in finding out... Read More
When you begin your search for a new home loan,... Read More
Home Equity Loan vs. 401(K) LoanYou've finally decided to add... Read More
If you are considering a new home loan anytime soon,... Read More
Although any loan used for buying real estate is strictly... Read More
Having a pre-approved mortgage will give you the confidence of... Read More
Applying for a subprime mortgage loan online can seem intimidating... Read More
Mortgage Refinance |