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Title : Home Loans for High Debt Ratios Houston and Their Effect on Your Loan Approval
Category : Business
How do you define a debt ratio? It is referred to as total monthly debt divided by your total monthly income. For example, if you pay $2,000 per month in bills and your income is $6,000 per month, your debt ratio is 33% or 1000/3000. In other words, about 1/3rd of your total income is assigned to your monthly bills. However, other factors go into this equation as well. Lenders generally calculate your debt ratio using your monthly income. Although very few, some tend to compute debt ratio with net income. If someone uses net income, they will usually take into account 75% of your gross income. Considering the debt side of your credit equation, the only debts reported on your credit report are calculated against your debt ratio. That means your payments for car insurance or your gym memberships are usually not considered. Additionally, a lot of utility companies, such as gas, electrical, and water, will document your monthly payments on your credit report. However, cell phone bills and utility bills are generally not calculated against debt ratio, even if the credit report has it. Whichever the case, a high debt ratio is not a good sign for your debt levels when you go for home loans for high debt ratios Houston . How does debt ratio affect your approvals? There are different criteria practiced by each lender for home loans for high debt ratios Houston when it comes to debt ratio. They might give a front end/back end ratio of 28/33. What This ratio implies is that no more than 28% of your monthly income can be assigned towards payment of a mortgage. In addition to that, your total debt load, including your auto loans, credit cards, and the new mortgage, cannot be more than 33%. This ratio has several inferences on home loans for high debt ratios Houston. First, the price of the house that you are allowed to shop for is not allowed to exceed a certain limit. Secondly, for people having a high debt load, it will limit your price range. You can be denied for a mortgage no matter how good your credit if you have too much debt. The debt ratio has this much of power for on your mortgage.
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