*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Debt to Income Ratio's (DTI) are crucial when it comes to getting a loan for your house. Mortgage Loan Officers will constantly be checking these numbers to make sure that a borrower's DTI fits within the parameters that each loan product requires. You can calculate your own DTI ratio by taking your monthly debts (bills, credit cards, etc.) and dividing them by your monthly gross income. The percentage that you come up with is your debt to income ratio.
How can I improve my DTI so that I can qualify for the loan product needed to purchase a home? Below are a few tips that can help get you in a better position to qualify for the loan you need.
1. Find a side-job or other stream of income.
More money coming in can help your percentage get into the range it needs in order to purchase your home. The more money you have coming in, versus going out, gives banks more reason to trust you with the money they're lending you. Something important to consider is that a side job income needs to have a history in order to use it for mortgage qualifying.
2. Take control of your spending.
Do you have non-essential things that you're constantly spending money on month-in and month-out? Maybe it's time to cut back on those "wants" for something that is a "need". Budgeting can help your ratios fall to a qualifying percentage.
3. Pay off your debts.
Is there credit cards that haven't been paid off yet? Do you only have a small amount of money left to pay before you own your car outright? Are you able to take a chunk out of your student loans if you put your mind to it? If you answered "yes" to any of these questions, do it! The less debt you have, the better!
4. Avoid taking on more debts.
I know that car looks really enticing, and that new boat is on sale, but whatever you do...don't even think about it until after you close on your home. Taking on new debt can kill a borrower's chances of buying a house. Adding new debts can push you out of the required DTI zone and crush your chances of getting a home loan.
5. Refinance your debts.
If there are options available to refinance or get forgiveness for your debts, do it! It's worth looking into cutting your current interest rates, or having your debts forgiven in order to qualify for a new home.
Talk to your loan officer today about where your DTI is at, versus where it needs to be to finance a home. If you'd like to run through numbers, please give me a call, I'd love to help in any way I can.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS #1606597
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