Home | Ask Your Question | Mortgage Glossary
Search a lender for:  

Untitled Document

Debt to Income Ratio

When applying for a mortgage, one of the very first things a lender will look at is your debt to income ratio. What is the debt to income ratio, and how does it work?

Your debt to income ratio is the amount of money you owe to creditors per month, divided by the amount of money you make per month (including your projected monthly mtg. payment).

So, if you make a gross monthly income of $3500.00, and your monthly bills run you around $1350.00 per month (including projected monthly mtg. payment), than your debt to income would be 39%.

A 39% debt to income ratio is not too bad. Most traditional banks allow up to 40%. There are banks out there that will allow as high as 55% and possibly higher, although I have never come across one.

Even though you may pay your bills on time every month and have rock solid credit, it is very safe to say that a lender will turn you down if your debt to income is above their requirements, so be prepared to pay off some debt in order to get your debt to income ratio down.

If the lender requires that you have a debt to income ratio of 45%, and your DTI ia 45.8%, the lender at times will make an exception for you based on credit, and payment history. During my experience over the years, when a debt to income ratio was this tight, it usually wasn't that hard to resolve. However it will take some negotiating skill on the part of your loan officer, or broker.

Doing Your Mortgage Homework

Don't Let Bad Credit Stop You

You'll be re-directed to Top-Lenders.com


Books about Purchasing a Home:

Most Relevant Mortgage Books