What is Debt to Income Ratio (DTI) ?
DTI is what lenders look at to determine if you qualify for a mortgage and how much you can pay. It is your monthly income vs monthly payment to creditors. Student loans are one of the debts lenders will take into consideration.
For most lenders, 40 percent DTI is on the higher end of the scale and could exclude you from securing a mortgage. Ideally, you want to shoot for a number below 36 percent before applying – 43 percent is the maximum typically allowed.
Here are some ways to improve this ratio:
Price Range: Look for homes that will give you a lower mortgage payment.
Increase your income – Even a slight uptick in monthly income can have a dramatic effect on your DTI.
Consolidate debts –Sometimes it is necessary to wait until certain debts are paid off. Lowering monthly student loan payments and consolidating credit card debts are two ways to improve your ratio.
Improve your credit score: Be on time with your debt payments! Keep your debt to a minimum.
No matter how prepared you are, nothing will replace the knowledge of an expert. The Inspired team has great relationships with several outstanding lenders who can walk you through the entire process.