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A Big Number To Watch In 2018? Your Debt-To-Income Ratio

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Are You Familiar With Your Debt-To-Income Ratio?

Home buyers have become more familiar with their debt-to-income ratios in recent years. That’s because mortgage lenders pay close attention to this ratio when determining whether they should lend  home-loan dollars to potential borrowers.

Expect lenders’ close examination of debt-to-income numbers to continue throughout 2018. In fact, debt-to-income ratios are nearly as important for potential mortgage borrowers today as are credit scores.

In general, lenders prefer that your monthly debts, a figure that includes your estimated new mortgage payment, take up no more than 43% of your gross monthly income. If your debt-to-ratio income rises higher than that, you’ll struggle to qualify for a mortgage loan.

This makes sense. Lenders want to make sure that you can afford to repay your mortgage on time every month. If you are burdened with high levels of debt, this can prove challenging. If you’re already paying plenty in credit-card or auto-loan debt, you might not be able to handle the increased financial pressure of a large mortgage payment.

If your debt-to-income ratio is too high, it’s time to work on reducing your debts or boosting your gross monthly income. Usually, it’s easier to eliminate some of your debts. Maybe you should hold off on applying for a mortgage until you’ve paid off some of your credit cards or other loans.

If you have debt-to-income questions, call us today. We’ll be happy to help you puzzle through the complexities of this key ratio.

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