I racked up considerable credit card debt in college. Yet I am very good about paying in every month and have never defualted or been late with a payment for ANY kind of debt. My income is above average but my total debt is about 1/4 of my income. how much of a problem does the bank view this as?
2006-08-04 03:32:48 · 8 answers · asked by Anonymous in Business & Finance ➔ Credit
Mortgage loan investors establish guidelines for acceptable debt to income levels. The industry standard is 36% of your income, including your mortgage payment, property taxes and homeowners insurance. With the advent of automated underwriting these guidelines are no longer the "hard and fast rule".
Mortgage lending is a risk based industry. The higher your loan to value (the less down payment you provide) the stronger your credit history, cash reserve position, and more important your debt to income ratio become.
There are a number of compensating factors for a high debt to income ratio that automated underwriting considers and that a manual underwriter may consider. Things like high credit scores, excellent cash reserve (available cash remaining after closing, job stability with a proven history of pay increases, or, as perhaps may be your case, completion of studies allowing you to enter into a field with a higher projected income, all factor in.
A consultation with a mortgage banker will enable you to determine your qualifying abilities.
2006-08-04 03:47:17 · answer #1 · answered by Anonymous · 1⤊ 0⤋
My mortgage broker said that your total monthly payments for your debt including the mortgage , taxes, and insurance that you would be assuming, should not total more than half your monthly income.
Of course that was a while ago, and it may be that different mortgage lenders have different guidelines, and your income to debt ratio is not the only standard that they would use, like how much money you have for a down payment. Usually 15% of the purchase price is the optimal amount.
Play around with the site in the link below.
Do some research about buying a house.
Lots of people will tell you to save your money and not use a mortgage broker, but my mortgage broker was great, and she was worth it. She was able to wheel and deal over things that I would not have known to try.
Good luck
2006-08-04 03:50:06 · answer #2 · answered by niffer's mom 4 · 0⤊ 0⤋
Credit Card debt is only part of the equation and really only counts when figuring your debt to income ratio. For instance you could have significant credit card debt but no car payment and still be ok. Other factors are your credit score and FICO. Best thing you can do is talk to lenders and see what they can offer you. Keep in mind more favorable factors such as low debt ratio and high credit scores will reduce your intrest rate.
2006-08-04 03:42:15 · answer #3 · answered by levindis 4 · 0⤊ 0⤋
Yeah, depending on how many credit cards you have and their balances, it can dramatically effect your ability to get a mortgage. Your best bet is always to pay the minimum payment on the cards with the lowest apr's, while paying as much as possible on the higher apr cards, until you've paid them off and cancel the accounts.
When applying for a mortgage, they count your maximum credit limit, not your actual balances. So if you have 5 cards with a 5,000 limit each, that counts as having 25,000 in debt, even if you only have a combined balance of 5,000, because they view it as your being able to, theoretically, go out the next day and max them all out.
2006-08-04 03:40:56 · answer #4 · answered by baldninja2004 2 · 0⤊ 0⤋
Most good rates/banks will allow 40% gross monthly income to be taken up by debt including the new mortgage.
example if you made gross of 8000 per month all your bills with the mortgage could add up to 3200.
2006-08-04 03:38:10 · answer #5 · answered by Anonymous · 0⤊ 0⤋
You're fine. 1/4 of your income is fine. It's easier to get a house than a car as it's better collateral. As long as your credit score is OK and it's only 1/4 of your income it shouldn't matter. It's charge offs and biting off more than you can chew that hurt your chances.
2006-08-04 03:37:39 · answer #6 · answered by MEL T 7 · 0⤊ 0⤋
It is unsecured debt and it will be considered a risk. You need to find out your FICO score-that can be found on your credit report and is a better indicator of your creditworthiness, as well as the percentage rate you will be charged.
2006-08-04 03:37:03 · answer #7 · answered by curiositycat 6 · 0⤊ 0⤋
huge, pay down the card first. to a manageable level.
2006-08-04 03:36:21 · answer #8 · answered by digital genius 6 · 0⤊ 0⤋