What is a debt to income ratio?
Debt to Income Ratio (DTI) The debt-to-income ratio, sometimes called the back ratio, is the percentage of your gross income that you can spend on housing plus debt payments.
Debt to Income Ratio (DTI) The debt-to-income ratio, sometimes called the back ratio, is the percentage of your gross income that you can spend on housing plus debt payments. This ratio varies by loan product, but it’s often in the 41%-50% range.
Example: Gross Income $5500/month
Other Debt $600 per month (car, student loans, credit cards)
Mortgage payment from prior slide $1500/month
$600 + $1500 = $2100 total debt/$5500 gross income = 38.18% DTI
How does my credit score effect me buying a house?
Credit scores are reviewed for mortgage qualification. Best is 740 or above although there are loan programs that go as low as 580 in some cases. If you haven’t reviewed your credit history recently, You can get a free copy of your credit report online, but it costs money to receive the scores.
Credit scores are reviewed for mortgage qualification. Best is 740 or above, although there are northeast home loan programs that go as low as 580 in some cases. If you haven’t reviewed your credit history recently, you can get a free copy of your credit report online here, but it costs money to receive the scores. For mortgage purposes, all 3 scores are reviewed: Experian, Transunion, Equifax.
Credit Score Scale (From Framework Homebuyer Seminar):
350 - 599 You probably won’t qualify for a mortgage.
600 - 680 You might qualify but will probably pay a higher interest rate and higher fees.
680 - plus You’re likely to qualify, and with a good interest rate and standard fees.
740 - plus You should get the best interest rates and the lowest fees.
What Impacts Scores?
35% payment history
30% amounts owed
15% length of credit history
10% new credit
10% credit mix