If you thought the biggest factor in qualifying for a loan is a credit score?.... then definitely read this article.
The biggest factor in qualifying for a loan is actually your DTI (Debt to Income Ratio)
When qualifying a client for a new loan, banks will want to see that your income has an appropriate ratio to your total debt.
For a simple scenario lets take a loo at the following example.
***John Smith is a staff Operations Manager at an Accounting Firm: He makes 10,000/mo (GROSS) salary income.
>>> He currently has the following debts:
+550/mo car payment
+150/mo student loan payment
+50/mo credit card payment
+50/mo credit card payment
TOTAL debt = 800/mo
Lenders like to see debt ratios at or below 40-50% Debt to Income Ratio - where you fall in that range will depend on other factors like; what your credit score is, and how much money you have in the bank.
Since John makes 10,000 his MAXIMUM debt threshold is somewhere between 4,000-5,000/mo (40-50% DTI).
Since John has 800/mo in current debts, his remaining balance that he is eligible for is 3200-4200/mo. This will be the number that dictates how much John can qualify for.
Here are items that ARE included in calculating your debt to income ratio;
Car Payments
Student Loan Payments
Alimony
Child Support
Credit Card Payments
Judgements
Collections
Mortgages
Housing Insurance
Property Taxes
HOA Dues
Here are items that ARE NOT included in calculating your debt to income ratio;
Cell phone bill
Electric
Gas
Water
Internet
