The #1 Factor That Could Make or Break Your Mortgage Approval

When it comes to getting approved for a mortgage, most buyers assume that income is the biggest factor that lenders look at. While your income is definitely important, there’s another major piece to the puzzle that can make or break your approval.

It’s your Debt-to-Income Ratio (aka DTI)! Your DTI measures how much of your monthly income goes toward debt payments like:

• Credit card bills

• Student loans

• Car loans 

When you go to get approved for a mortgage, your lender will look at your total monthly debt and your total monthly income, then calculate your DTI as a ratio/percentage. 

For example, if you make $6,000 a month and spend $2,400 on debt payments, your DTI would be 40%. But if you made the same income and only spent $1,000 on debt, your DTI would be 17%. 

For lenders, the lower your DTI, the better! A lower DTI signals that you’ll be able to take on a mortgage payment without feeling stretched too thin by your debt payments. 

Even if your income looks great on paper, if you’re carrying a lot of monthly debt, it can seriously limit the loan you qualify for. Most lenders won’t approve your mortgage if you have a DTI of 43% or greater. 

Before applying for a mortgage, here are a few tips you can use to lower your DTI:

• Pay down your credit cards as much as possible

• Avoid financing large purchases (like a new car!)

• Consider consolidating debts to lower monthly payments
  

Keeping your debt-to-income ratio in a healthy range is one of the best things you can do to set yourself up for mortgage success! 

Have questions about how your DTI could impact your buying power? Reply to this email and let’s chat.

Ready to make the move? Schedule a call with Summer Carter today and start finding your place in Austin: https://bit.ly/buysellwithsummer