My Blog
Real Estate Terms: The ‘Debt to Income’ Ratio and How It Affects Your Home Purchase
The real estate market is rife with terminology that can make a home purchase seem more than a little complicated. If you’re currently looking for a home and are considering your loan options, you may have even heard the term ‘Debt to Income’ ratio. In the interest of simplifying things, here are some insights on what this term means and how it can impact your home investment.
Determining Your ‘Debt to Income’ Ratio
It’s important to consider what exactly your DTI ratio is before your home purchase as this will quickly determine how much home you can actually afford. To calculate this number, take your monthly debt payments – including any credit card, loan and mortgage payments – and divide them by your monthly gross income to get a percentage. In the event that your monthly debt is $700 and you make $2800 in income, your DTI is 25%.
What Your DTI Means To The Bank
The DTI is a very important number when it comes to a home loan because it enables the bank to determine your financial situation. A DTI of 25% leaves some wiggle room, as most banks will allow a DTI percentage that runs between 36-43%. In the case of the above example, this means that the most debt this person could take on per month is about $1200. While banks vary on this percentage, credit history plays an important part in the DTI that will be allowed.
Paying Down Your Debt Or Purchasing A Home
In the event that you have a DTI ratio that exceeds what your bank will allow, you will need to consider your debts before moving on to investing in a home. If you’re planning on purchasing a home in the next year, it’s a good idea to tackle high-interest debt first. However, if you happen to have a chunk of money saved up that you’re planning on putting into a down payment, it’s worth considering that putting more than 20% down may slightly increase the DTI percentage your bank will accept.
There are many fancy terms that go along with the world of real estate, but it’s important to understand what they mean so you can make them work in your favor. If you’re calculating your DTI ratio and are planning a home purchase down the road, you may want to contact your trusted mortgage professionals for more information.
Related Articles:
Mark Taylor | Arizona Home Loans | Blarming | Will You Listen to Me | Arizona Short Sales | Arizona Foreclosures | Arizona FHA Loans | Arizona USDA Loans | Real Estate Websites | Arizona HUD Homes | Ariona VA Loans | Fix My Broken Credit | Arizona Mortgage | Arizona Short Sale | Power Ranch Bank Owned Homes
Comments are closed.
by Mark Tayloron | Arizona Mortgage | The Mark Taylor Teamon |
Amerifirst Financial Inc. | By Mark Taylor © 2012 | Banker # BK0013635 | AZ NMLS ID 207897 | CA NMLS ID CA-DOC207897
Our Team | Arizona Mortgage | Blarming | Will You Listen to Me | Arizona Short Sales | Arizona Foreclosures | Arizona FHA Loans | Arizona USDA Loans
| Arizona HUD Homes | Ariona VA Loans | Arizona Mortgage | AZ Short Sale Help | Power Ranch Bank Owned Homes | Find me on Google Earth | Arizona Mortgage Sitemap
AmeriFirst Financial, Inc., 1550 E. McKellips Road, Suite 117, Mesa, AZ 85203 (NMLS # 145368). 1-877-276-1974. Copyright 2014. All Rights Reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions and limitations apply. License Information: Click Here for Licensing
Mark Taylor | Certified Mortgage Planner | NMLS 207897 | AmeriFirst Financial, Inc. | NMLS 145368 | 14350 N. 87th Street, Suite 310, Scottsdale, AZ 85260 | Direct: 480.289.7644 | Mobile: 602.361.0707 | mtaylor@amerifirst.us | AFI Privacy Policy
Real Estate Websites & Realtors Websites & Realtor Websites by Char Bennett of YourSiteNeedsMe