I would like to lower my debt to income ratio. I am paying off my debt as much as I can every month. My debt is around 7K. I have 500 open on a credit card and 700 on another. So if a mortgage broker was looking at my debt to income ratio would it be 5800 since I have the open lines of credit??
2007-02-20 03:38:37 · 6 answers · asked by CEESONE 4 in Business & Finance ➔ Credit
No Im not maxed by any means! Trying to get the most bang for my buck!
2007-02-20 05:12:05 · update #1
You are reffering to your debt utilization ratio -which is basically used as a factor in figuring your credit score...Debt to income ratio is alot more then what you mentioned.
Typically debt to income looks at adding up your potential mortgage payment/per month+property tax/per month+insurace and then adds your MINIMUM credit card payments every month and your additional debts like car payments and then divide it by your monthly income Most dont want to see that number get higher then 40%, although many will allow it even higher.
So for examply if you make 4k a month.. A mortage broker wants to see around 1600 or less going for your home costs +monthly debts.
2007-02-20 03:45:59 · answer #1 · answered by Anonymous · 2⤊ 0⤋
You're actually looking at this wrong.
Your debt to income is based on your gross monthly income, and then they subtract your MONTHLY bills-- not the outstanding amount.
So, say you make $2000 (Gross) per month. You have a car payment for $200 and two credit card payments with a min. payment each month of $50 each.
You have $300 outgoing each month and $2000 incoming, so your debt to income is 300/2000= 15%.
Most mortgage lenders allow anywhere from 35-45% overall debt to income. In this case you would have 20-30% free for a mortgage loan, which means you could pay $400-600 per month for a mortgage (which would need to include taxes and insurance.)
2007-02-20 03:45:57 · answer #2 · answered by Anonymous · 0⤊ 1⤋
your debt to income is figured on a monthly basis. All expenses that you will have every month divided by your total monthly income. So in your case your minimum payments would be what are affecting you. If you make for example $2000 a month and your expenses are as follows:
Car: $400
Rent: $650
Visa: $50 (minimum payment)
Master Card: $65 (minimum payment)
your total expense would be $1165
Your debt to income would then be roughly 59%
It also depends on the lender you are at. When I was a validator my company ommitted any revolving credit accounts. (revolving account are accounts that can change monthly, i.e. credit cards)
Most lenders will usually just take the minimum payment as the debt.
I hope that helps.
2007-02-20 03:46:52 · answer #3 · answered by fenderjonesy 2 · 1⤊ 0⤋
In this case your debt is the monthly payments for your credit cards and loans.
A mortgage broker would add your minimum monthly debt payments plus a projected mortgage payment. That would be divided by your gross monthly income to get the ratio.
2007-02-20 03:42:58 · answer #4 · answered by Tim P 2 · 0⤊ 1⤋
It sounds like you are maxed in which case you will not get a good interest rate on your mortgage. Your ideal debt ceiling should never be more than a third of your credit limit. Stop charging and start paying.
2007-02-20 03:49:59 · answer #5 · answered by Your #1 fan 6 · 0⤊ 1⤋