In particular we focus on getting the loan structure right the first time, choosing which lenders to use in the right order (yes this is important) and finally getting our clients the best deal possible.
DTI (Debt to Income Ratio)
DTI is total debt divided by total annual gross income. DTI is calculated by taking your total debt and dividing it by your annual income. For example, if you earn $150,000 per year (I) and have a personal loan of $25,000 and a home loan of $300,000 (D) then your DTI is 2.1, meaning you owe 2.1 times what you earn.
A DTI of 3-4 is considered low, but a DTI of 6 is considered high. This is an important tool that lenders use as they are trying to ensure you don’t get yourself into too much debt and use more than 30-40% of your annual income on home loan repayments.
Lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment.
Learn MoreTo find debt-to-income ratio (DTI) you need to add up your total credit or debt balances and divide it by your total gross annual income.
Learn MoreWays to lower your debt-to-income ratio include paying off any high interest debt, lowering interest on some of your debts, not taking on more debt and increasing the amount you pay monthly towards debts.
Learn MoreEach lender has their own DTI ratio (Debt to Income) calculation that they will consider stable for a home loan applicant to have, it is essentially a stress test to make sure the applicant can make comfortable repayments.
Majority of lenders max DTI would be 6, if it goes over this the lender may consider it to risky to lend to the applicant as they may not be able to afford the ongoing repayments. Although some lenders will go higher and cap at 7 or 8, but these will need to be manually approved by their credit departments.
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