When you visit your lender to get a mortgage for your home, they will tell you the maximum amount that you are allowed to borrow. But how do they reach this total and what factors do they take into consideration? How do they determine that one borrower can take on a bigger mortgage than the next? This decision is made by mortgage companies by considering a wide range of factors, including your credit information, your salary and much more. Here Are Some Of The Common Ways That Lenders Determine How Much You Can Borrow: 1. Percentage Of Gross Monthly Income Many lenders follow the rule that your monthly mortgage payment should never exceed 28% of your gross monthly income. This will … [Read more...]
Assessing Your ‘Debt-to-Income Ratio’ and Why This Number Matters When Getting a Mortgage
If you are looking to buy a home, you may want to consider shopping for a loan first. Having your financing squared away ahead of time can make it easier to be taken seriously by buyers and help move along the closing process. For those who are looking to get a mortgage soon, keep in mind that the Debt-to-Income ratio of the borrower plays a huge role in the approval of your mortgage application. What is a Debt-to-Income Ratio? A debt-to-income ratio is the percentage of monthly debt payments compared to the amount of gross income that a person earns each month. Your gross monthly income is typically the amount of money you earn before taxes and other deductions are taken out. If a … [Read more...]
Starting to Shop for a Mortgage? How to Assess Your ‘Debt-to-Income Ratio’ and Why This Number Matters
Those who are looking to buy a home may want to start by shopping for a loan first. Having financing ahead of time may make it easier to get sellers to take a buyer seriously and help move along the closing process. For those who are looking to get a mortgage, the most important factor for having a mortgage application approved is the debt-to-income ratio of the borrower. What Is a Debt-to-Income Ratio? A debt-to-income ratio is simply the percentage of debt compared to the amount of income that a person brings in. If a person brought home $1,000 a month and had $500 worth of debt, that person would have a DTI of 50 percent. To improve the odds of getting a home loan, experts recommend that … [Read more...]
