What is Debt-to-Income Ratio When You Buy a Home in Ellicott City?

When you buy a home in Ellicott City, Columbia, Catonsville or elsewhere, you’ll most likely need a mortgage – and that means a lender will look at your debt-to-income ratio, or DTI.
But what is debt-to-income ratio, and how will it affect your home purchase?

Your debt-to-income ratio is the ratio of how much money you owe your creditors (like credit card companies, personal lenders and others) to how much money you make each month.
Your DTI is an important part of your overall financial health, so lenders use it to see whether you’re likely to pay back a home loan.
Lenders want you to have a debt-to-income ratio around 36 percent, with no more than 28 percent of your debt going to the mortgage payment.
Related: What to ask your mortgage lender

How to Figure Out Your DTI Before You Apply for a Loan

You can figure out your own debt-to-income ratio – or at least pretty close – by adding your monthly bills and dividing the total by your gross monthly income.
Add:

Monthly rent or house payment
Alimony or child support payments you have to make each month
Student loan payments
Car payments
Other monthly loan payments
Your minimum monthly payments on credit cards
Other debt obligations you pay each month

Don’t count groceries, utility bills and taxes.
Then, divide your total by your gross monthly income (what you make before taxes).
The result is your DTI, which will be a percentage.
Remember, the lower your DTI is, the less risky lenders think you are.

Are You Buying a Home in Ellicott City?

If you’re ready to buy a home for sale in Ellicott City, we can help you find the right one.
Call us at 410-465-5822 to tell us what you want from your next home or to schedule a tour in a home you’ve seen online.
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