More information on Debt to Income Ratio and Income

  • How do you make your money?

    They, the underwriters, are going to want to know your gross monthly income and how you earn it. In other words are you salaried, paid hourly, are you paid only commission, or are you self-employed, etc?

  • What is debt ratio?

    They will compare your monthly debt (minimum payments on your credit cards, auto loans, student loans, your house payment etc.) to your gross monthly income to determine your debt to income ratio or your debt ratio. Generally, a debt ratio under .45 is considered “good”. There are some programs that allow debt ratios up to 65% if your credit is good enough.

  • How do I calculate my monthly income?

    To calculate your monthly income follow these suggestions. If you get paid an hourly wage and work full time, then multiply your hourly wage by 40 hours and then by 52 weeks and divide this figure by 12 months. This will give you a rough estimate of your monthly income. If you are salaried, divide your annual salary by 12 months to give you your monthly income.

  • What bills do I include in my debt ratio?

    Your monthly bills that they care about in this calculation are your car loans, student loans, credit card minimum payments, child support payments, alimony payments, consolidation loans, and what your actual or expected monthly mortgage payment, etc. Don’t add in your electric, gas, cable, cell, telephone, internet. They don’t care about what those payments are.

  • How do I calculate my debt ratio?
  • To calculate your debt ratio, divide your gross monthly income by the sum of all your monthly bills.

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