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What Is The Debt To Income Ratio When Buying A Home?

Debt to income ratio

By Team Birtola High Desert Realty

One common question every home buyer has on their minds when they first start thinking about buying a home is, “How much home can I really afford?”

The answer to how much home you can afford relates to your debt-to-income ratio.

What Is Debt To Income Ratio (DTI)?

Debt-To-Income-Ratio (DTI) is factored by adding up all of the monthly bills you are responsible for paying every month then dividing that number by your gross monthly income.

Most lenders want to see a DTI of no more than 40%, especially since recent changes in the mortgage industry thanks to the Qualified Mortgage Rule will make it more difficult for some home buyers to qualify for mortgages.

Example Debt To Income Ratio

Let’s say you have a gross income of $120,000 per year and you have $3,500 / liabilities each month, this means you have a debt-to-income ratio of 35%.

How to Improve Your Debt to Income Ratio

Although it might seem difficult to lower your debt to income ratio, you can do this by paying off more of your debts or working more hours before you apply for a mortgage loan.

Following either of these tips will lower your debt to income ratio.

To learn more tips you can use to buy the right home or to view homes for sale across Central oregon, contact Team Birtola by calling us at (541) 312-9449 or click here to contact us through our website.