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One of the many variables lenders use when deciding whether or not to loan you money is your debt-to-income ratio or DTI. Your DTI reveals how much debt you owe compared to the income you earn ...
Use your monthly payment for fixed-rate loans like personal loans and auto loans. Use your minimum monthly payment for variable-rate accounts like credit card payments or a home equity line of ...
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The two main kinds of DTI are expressed as a pair using the notation / (for example, 28/36).. The first DTI, known as the front-end ratio, indicates the percentage of income that goes toward housing costs, which for renters is the rent amount and for homeowners is PITI (mortgage principal and interest, mortgage insurance premium [when applicable], hazard insurance premium, property taxes, and ...
For an example, if a borrower has a $500 car payment, $100 in credit and loan payments, pays $500 in child support and wants a mortgage with payments $1,000 per month, her total monthly obligations is $2100. If she makes $5,000 a month, her debt to income ratio is 42%.
However, some borrowers seek to incorporate their unsecured debt into their mortgage (secured debt). They seek to pay off the debt that is outstanding in amount. These debts are called "liabilities", these liabilities are calculated into a ratio that lenders use to calculate risk. This ratio is called the "debt-to-income ratio" (DTI). If the ...
A mortgage calculator can help to add up all income sources and compare this to all monthly debt payments. [citation needed] It can also factor in a potential mortgage payment and other associated housing costs (property taxes, homeownership dues, etc.). One can test different loan sizes and interest rates.
For one thing, debt to income can be an important factor in determining whether you qualify for … Continue reading → The post How to Use (and Calculate) Debt-to-Income Ratio appeared first on ...