Here’s how your debt-to-income ratio factors into getting a mortgage.
What is a debt-to-income ratio, and how does it affect your mortgage? We’ve been receiving a lot of mortgage questions recently, so we figured we’d answer one of the most common ones for you today.
If you’ve researched mortgages at all, then you’ve probably come across the term debt-to-income ratio. It’s basically how much of your monthly income you spend on bills, but let’s dive a little deeper into it.
Different types of loans offer different debt-to-income ratios, and every situation is different.
First, we have to start with your fixed expenses. This includes stuff like your new mortgage, insurance costs, taxes, rent, student loan payments, car payments, and other similar expenses. If something is variable, it does not factor into this. In other words, your gas payments and grocery bills don’t count.
If you’re carrying a debt load on your credit card, that will count. These payments tend to stay consistent, so they aren’t as variable as you may think. If you own a rental property, they factor that in as well.
Different types of loans offer different debt-to-income ratios, and every situation is different. If you have any questions, we can hook you up with a mortgage expert, so give us a call. We are always willing to help.