Your debt-to-income ratio (DTI) is a measurement of your monthly expenses, divided by your gross monthly income. However, this percentage also factors into your personal lifestyle, in that a high percentage could jeopardize your chances of being able to buy or rent a place to live, purchase a vehicle, or obtain a loan. At the very least, it could make the process a little more difficult, as your credit score tells the tale when lenders conduct a background check into your credit history.
As the word suggests, the "debt" portion of a DTI refers to the revolving expenses from various loans. That includes car payments, student loans, credit cards, and mortgages. These monthly expenses are added up and divided by monthly gross income, which is how the final percentage is calculated. Most lenders want a maximum of 36%, but that number may change depending on your credit score.
For example, if your expenses total $750, and your gross income is $2,500, your DTI would be 30%, which is just below the common threshold. However, say you want to buy a house, and the projected mortgage would be $600, bringing your possible debts to $1,350 a month. Your DTI ratio now skyrockets to 54%, way over the limit. If you find yourself in that situation, all is not lost, but it may take you a little longer to get yourself into your dream house or car.
Depending on your monthly list of expenses, you may want to put yourself on a budget. Take a look at what you purchase on a regular basis. For example, do you go out to eat often? If so, consider cutting back and cook at home more often. Do you have the highest tiered cable, cell phone or internet plans? Downgrade to a lower package, and save a little money. Put the extra money into a savings account, or apply it to your bills. Doing the latter can help pay off those expenses quicker, and also lower your debt-to-income ratio in the process.
If you have not received your refund check, once that arrives, you can also use some or all of your refund amount to pay down some of your expenses. Paying off a credit card reduces the percentage, and increases your credit score. That way, the next time the lender does a background check into your credit, a much lower percentage - and a much higher credit score - shows up, helping you get the house or car you have dreamed so much about.
Author writes about a variety of topics. If you would like to learn more about a background check from Lexis Nexis, please visit http://www.lexisnexis.com/risk/.
Article Source: http://EzineArticles.com/?expert=Jeremy_P_Stanfords
Article Source: http://EzineArticles.com/7667344
As the word suggests, the "debt" portion of a DTI refers to the revolving expenses from various loans. That includes car payments, student loans, credit cards, and mortgages. These monthly expenses are added up and divided by monthly gross income, which is how the final percentage is calculated. Most lenders want a maximum of 36%, but that number may change depending on your credit score.
For example, if your expenses total $750, and your gross income is $2,500, your DTI would be 30%, which is just below the common threshold. However, say you want to buy a house, and the projected mortgage would be $600, bringing your possible debts to $1,350 a month. Your DTI ratio now skyrockets to 54%, way over the limit. If you find yourself in that situation, all is not lost, but it may take you a little longer to get yourself into your dream house or car.
Depending on your monthly list of expenses, you may want to put yourself on a budget. Take a look at what you purchase on a regular basis. For example, do you go out to eat often? If so, consider cutting back and cook at home more often. Do you have the highest tiered cable, cell phone or internet plans? Downgrade to a lower package, and save a little money. Put the extra money into a savings account, or apply it to your bills. Doing the latter can help pay off those expenses quicker, and also lower your debt-to-income ratio in the process.
If you have not received your refund check, once that arrives, you can also use some or all of your refund amount to pay down some of your expenses. Paying off a credit card reduces the percentage, and increases your credit score. That way, the next time the lender does a background check into your credit, a much lower percentage - and a much higher credit score - shows up, helping you get the house or car you have dreamed so much about.
Author writes about a variety of topics. If you would like to learn more about a background check from Lexis Nexis, please visit http://www.lexisnexis.com/risk/.
Article Source: http://EzineArticles.com/?expert=Jeremy_P_Stanfords
Article Source: http://EzineArticles.com/7667344
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