Debt To Income Ratio

Your debt-to-income ratio is a measure of risk. Creditors want to know that you'll be able to pay them back in a timely and consistent fashion. Read on for more debt to income ratio information.

The Debt To Income Ratio

Debt to Income Ratios and it's Effect on Available Real Estate Credit

Debt to income ratio is used by lending institutions to determine whether a person is qualified for a mortgage. It is a way to calculate how much a person's income goes toward payment of debt and how much he can afford to spend on monthly housing costs. It shows what percentage of a person's income is available for a mortgage payment after other obligations are met. The debt to income ratio is one important aspect a lender considers before approving a loan.

Credit is what people use to buy products or debt services today and pay for it at a later date. This includes credit cards, utilities, personal loans or a mortgage. People are charged interest or service charges by the creditor. It is critical that payment is made on time, because a credit history will show a borrower's past debt actions with regard to payment pattern - whether he has been faithful in repaying on time or he has been delayed a number of times. It does not show whether a person is good or bad, but it shows whether a person is a good or bad credit risk...[more Debt To Income Ratio]

Wikipedia on Debt to Income Ratio

A debt-to-income ratio (often abbreviated DTI) is the percentage of a consumer's monthly gross income that goes toward paying debts. (Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance premiums as well. Nevertheless, the term is a set phrase that serves as a convenient, well-understood shorthand.) There are two main kinds of DTI, as discussed below.

Two main kinds of DTI
The two main kinds of DTI are expressed as a pair using the notation x/y (for example, 28/36). The first DTI, known as the front ratio, indicates the percentage of income that goes toward housing costs, which for renters is the rent amount and for homeowners is PITI (PITI includes mortgage principal and interest, mortgage insurance premium [when applicable], hazard insurance premium, property taxes, and homeowners association dues [when applicable]). The second DTI, known as the back ratio, indicates the percentage of income that goes toward paying all recurring debt payments, including those covered by the first DTI, and other debts such as credit card payments, car loan payments, student loan payments, child support payments, alimony payments, and legal judgments. For more, see Wikipedia, Debt To Income Ratio.

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Related Resources to the Debt To Income Ratio

Debt to Income Ratio - Buying a Home | About.com: When you're buying a home, lenders look at your debt to income ratio. This measure of your debt load has an impact on how much house you can buy. Learn how to calculate the ratio and find out what lenders are looking for...
Howstuffworks "How Mortgages Work": Are you in the market for a new house? That probably puts you in the market for a mortgage, too -- along with dozens of terms, hours of paperwork and decades of payments. Learn how to make the most of your money...
When Your Finances Get Stretched Too Thin: Foreclosure is a four letter word for most home owners. As times get tighter and finances get stretched thinner and thinner, the high price tag of a mortgage payment can quickly seem like an untenable cost that is only dragging down you or your family...
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Debt Evaluation Calculator, debt evaluator, Debt Ratio - MSN Money: The first step to knowing whether you're potentially in financial trouble is to know how much you spend each month to pay off debts and other ongoing obligations. This calculator will help you find out how much you're paying each month and whether your ratio of debt to income is acceptable or too high...
USNews.com: Personal Finance: Debt-to-Income Ratio Calculator: More than 100 calculators in 12 key categories help you make better and more informed financial decisions...
Debt to Income Ratio Worksheet: This debt to income ratio worksheet has been created to help you calculate how much debt you can afford. Use this to determine the ratio between your current income and current debt. This worksheet can be used online or it can be printed for manual use...

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Lensmaster

SaraMu wrote...

This is something so critical to both homes and cars. It's scary to think about sometimes, but oh so important.

Posted November 26, 2008

Lensmaster

JaguarJulie wrote...

OMG, I surely don't want to know our debt to income ratio! I'd venture to guess that the numbers have significantly shifted over the past year or so since we launched our partnership business. 5***** for a terrific lens -- as usual!

Posted August 31, 2008

Lensmaster

Wayne_Long wrote...

Thanks for the info! I gave you 5 stars.

Posted September 23, 2007

Lensmaster

Aika wrote...

more to learn from this lens, thank you so much for sharing. Once again, great job SemperFidelis.

Posted September 23, 2007

Lensmaster

ShortSaleRealtor wrote...

Thanks for the info Colleen...