With housing prices increasing and rates trending upward, many borrowers are seeing their debt to income (DTI) ratio go up because their projected housing payment is now higher than what it was going to be 6-12 months ago. But there are some ways as loan officers we can help you with your DTI and get you qualified for a home loan.
First, let me explain what your DTI is. Your debt to income ratio is simply your monthly debts divided by your monthly income. Monthly debts most commonly include but are not limited to your new projected mortgage payment (PITI), any car payment, student loan payments and the minimum payments on your credit card. Monthly income is simply your gross (pre-tax) monthly income. When we divide the total debts by the total income, we need that ratio to be below 43% (there are sometimes exceptions for the ratio to be near 50% in certain cases).
While your income is fixed for the most part, your monthly debts can be adjusted. So if you find your DTI is too high, talk with your loan officer about how you can decrease your monthly debt obligations. For example, if a parent pays your student loans, there is a way to obsolete that debt from your profile. The same goes for a car payment if a parent or business consistently makes that payment.