Your Debt to Income Ratio Matters

Your debt to income ratio matters! Interesting article  in the L. A. Times regarding home loans and why banks are turning borrowers down for home loans:

The reasons for the turn downs typically involve multiple factors, including below-par credit scores, inadequate documented income to support the monthly payments, and little savings in the bank. A new survey by credit-score giant FICO offers buyers a rare peek inside the heads of credit-risk managers at financial institutions across the country and in Canada. Researchers asked a representative sample of them what single factor in an application makes them most hesitant to fund a loan request — in other words, what’s most likely to prompt them to say no.

The results provide practical insights to anyone who is thinking about applying for a mortgage. Tops on the list? Surprise, it’s not your credit scores. It’s not how much you’ve got for a down payment or what’s in the bank. It’s your “DTIs” — your debt to income ratios. Nearly 60% of risk managers in the FICO study rated excessive DTIs their No. 1 concern factor — five times the percentage who picked the next biggest turnoff.” Read the full article here Debt to income ratio can sink mortgage application

The bottom line is that lenders are looking at more than just your credit score and how much money you make when deciding whether or not to give you a home loan. They are most interested in what you spend in relation to the amount of money you bring in every month (your debt to income ratio).  This is one more reason that it is so important to work with a lender/mortgage broker who knows what they are doing. I am fortunate to work with one of the best in the business, Rick Costa from Bay Equity Mortgage. Do yourself a favor and ask Rick to help you navigate the home loan minefield. Mortgage Pre-Qualification

Til next time… May all your deals be easy ones!
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Clint Hanks                                   707-391-6000