Measuring your existing debts against your existing income is one part of a lender’s required assessment of your ability to repay a loan.
Like the video says: debts are existing financial commitments; a car payment is a debt a grocery bill is not.
To calculate your debt-to-income ratio add up your monthly debt payments and divide them by your GROSS monthly income. (Gross income is generally the amount of money you earn BEFORE taxes and other deductions.) The Federally-established debt-to-income target is a maximum of 43% for Qualified Mortgages.
If your ratio is higher there may be other loans available – however, there may also be additional questions to establish your ability to repay, and the rates may be different than those available for Qualified Mortgages.
Studies suggest that a high debt-to-income ratio puts a homeowner at greater risk of challenges making monthly payments. So consider your situation and risks carefully before exceeding that suggested ratio.
"I know it took some long hours for Lindsey to get this work done so quickly! That was excellent in my thoughts and opinion! Kiddos to kid-o! Thank you for professionalism! You’re the BEST! God bless!"
Deloris S. - Borrower - OH
"Thank you for getting us closed so quickly!"
Cerina W. - Selling Agent - Hurricane, WV
"BesTitle did a great job. We were in a hurry to close on our new house and they made it happen very quickly. Joanie was very friendly and a pleasure to work with."
Michael R. - Borrower - WV