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Old Yesterday, 08:58 AM
 
2 posts, read 63 times
Reputation: 10

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So I am currently in process of buying a house. We are waiting for the Atty revu to complete and start inspections and the loan process. My issue is the DTI and what options I should go with moving forward.

My credit is growing since I started my high paying job over 2 years ago and I have been paying off debt. I am married and she only has student loans nothing else. I am getting a raise by July 1st which will be 15-20% bump but I didn't add that to any calculations.

I was able to calculate our DTI combining our Gross Salary, it comes to 22/48 with the personal loan, car loan and some credit card payments (This is including the upcoming mortgage with taxes, HOA, etc)

Personal loan has only 20 months left on it but will drop faster as I pay much more than the minimum installments but the minimum is already pretty high and fixed for fast payoff and lower rates.

Thoughts -

Paying off the cards I can drop the DTI to 22/46 roughly and increase my credit score with very low to no balances aside for student, personal, and car loan.

Pay off the Personal loan and drop DTI to 22/38 and pay the cards off after we have the Mortgage Loan.

Leave everything alone, would I have an issue with getting the mortgage at 22/48 and a higher cash reserve.

We also have enough for the 20% down and closing costs for the house reserved since we are looking to do 30 year conventional.
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Old Yesterday, 11:16 AM
 
8,836 posts, read 5,462,494 times
Reputation: 9279
Your fractions are screwy, I don't know what 22/48 means besides it's close to 50%.

DTI is expressed a percentage not a fraction, it can be expressed as a fraction but the denominator would have to be 100.

https://www.thebalance.com/how-to-ca...e-ratio-960851 This link shows an example

Mortgage = $950 (total PITI) Minimum credit card payments = $235 Car loan = $355
So, $950 + $235 + $355 = $1,540 total monthly debt payments

monthly gross income = $3,500 child support = $500
total monthly income = $3,500 + $500 = $4,000.

In the example, the monthly debt payments total $1,540 and his monthly income totals $4,000. So, divide $1,540 by $4,000 and then multiply by 100.

$1540 / $4000 = .385 X 100 = 38.5 percent

a debt-to-income ratio of 38.5 percent.

Your debt to income ratio has almost nothing to do with your credit score in the short term. You go to the bank with your credit score, the better it is the better interest rate you get.

You can have a horrible dti ratio and excellent credit such as a senior on a fixed income with great credit but the home will be her only debt but is 48% of her Social Security.


or bad credit and buying an affordable home with a good paying job giving you a bad credit score and good dti ratio.

There are also DTI calculators online https://www.nerdwallet.com/blog/loan...-income-ratio/

You really need to go to a free first time homeowner's class, or if you can't try to find one on youtube.

Last edited by LifeIsGood01; Yesterday at 11:29 AM..
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Old Yesterday, 11:31 AM
 
210 posts, read 114,051 times
Reputation: 440
Don't do anything right now. Let your lender guide you if they need you to bring that back ratio down. They should be able to tell you exactly what will get you the most bang for your buck. And you might be okay with the higher ratio and reserves in the bank.
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Old Yesterday, 01:09 PM
 
2 posts, read 63 times
Reputation: 10
Quote:
Originally Posted by LifeIsGood01 View Post
Your fractions are screwy, I don't know what 22/48 means besides it's close to 50%.

DTI is expressed a percentage not a fraction, it can be expressed as a fraction but the denominator would have to be 100.

[url]https://www.thebalance.com/how-to-calculate-your-debt-to-income-ratio-960851[/url] This link shows an example

Mortgage = $950 (total PITI) Minimum credit card payments = $235 Car loan = $355
So, $950 + $235 + $355 = $1,540 total monthly debt payments

monthly gross income = $3,500 child support = $500
total monthly income = $3,500 + $500 = $4,000.

In the example, the monthly debt payments total $1,540 and his monthly income totals $4,000. So, divide $1,540 by $4,000 and then multiply by 100.

$1540 / $4000 = .385 X 100 = 38.5 percent

a debt-to-income ratio of 38.5 percent.

Your debt to income ratio has almost nothing to do with your credit score in the short term. You go to the bank with your credit score, the better it is the better interest rate you get.

You can have a horrible dti ratio and excellent credit such as a senior on a fixed income with great credit but the home will be her only debt but is 48% of her Social Security.


or bad credit and buying an affordable home with a good paying job giving you a bad credit score and good dti ratio.

There are also DTI calculators online [url]https://www.nerdwallet.com/blog/loans/calculate-debt-income-ratio/[/url]

You really need to go to a free first time homeowner's class, or if you can't try to find one on youtube.
I may have worded it wrong its 22 front end and 48 back end. I was mostly concerned of just not being able to get the loan due to the higher backend.

Quote:
Originally Posted by MsVulcan500 View Post
Don't do anything right now. Let your lender guide you if they need you to bring that back ratio down. They should be able to tell you exactly what will get you the most bang for your buck. And you might be okay with the higher ratio and reserves in the bank.
I was looking at this as well and maybe just pay off CC debt to increase my credit score and leave the Personal loan alone and take it from there.
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Old Today, 09:30 AM
 
4,331 posts, read 11,243,914 times
Reputation: 2650
Quote:
Originally Posted by Krish12 View Post
So I am currently in process of buying a house. We are waiting for the Atty revu to complete and start inspections and the loan process. My issue is the DTI and what options I should go with moving forward.

My credit is growing since I started my high paying job over 2 years ago and I have been paying off debt. I am married and she only has student loans nothing else. I am getting a raise by July 1st which will be 15-20% bump but I didn't add that to any calculations.

I was able to calculate our DTI combining our Gross Salary, it comes to 22/48 with the personal loan, car loan and some credit card payments (This is including the upcoming mortgage with taxes, HOA, etc)

Personal loan has only 20 months left on it but will drop faster as I pay much more than the minimum installments but the minimum is already pretty high and fixed for fast payoff and lower rates.

Thoughts -

Paying off the cards I can drop the DTI to 22/46 roughly and increase my credit score with very low to no balances aside for student, personal, and car loan.

Pay off the Personal loan and drop DTI to 22/38 and pay the cards off after we have the Mortgage Loan.

Leave everything alone, would I have an issue with getting the mortgage at 22/48 and a higher cash reserve.

We also have enough for the 20% down and closing costs for the house reserved since we are looking to do 30 year conventional.
If your credit score is 740+, you can probably get approved "as-is" right now with the 20% down. If your raise is straight salary, they can count all that income right away on July 1st so you would easily qualify at that time.
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Old Today, 12:27 PM
 
8,836 posts, read 5,462,494 times
Reputation: 9279
Quote:
Originally Posted by TimtheGuy View Post
If your credit score is 740+, you can probably get approved "as-is" right now with the 20% down. If your raise is straight salary, they can count all that income right away on July 1st so you would easily qualify at that time.
If he's putting 20% down his debt to income ratio should be on the other 80% so if he calculated it on the total price of the house he is now ahead.
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