Your Debt To Income Ratio: How To Figure It Out
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- เผยแพร่เมื่อ 5 ก.ย. 2024
- What's your debt to income ratio? And can you qualify for a mortgage with your debt to income ratio? Let's walk through some examples!
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Again brother. Exactly what I needed to know.
Thank you so much for watching!! :)
Hi Kyle - You forget to add Car payment & Credit Card payment to calculate DTI.
Make sure to watch all of the video
I watched the whole video and I still don’t understand. 400+100+500+1060= 2060. I heard mentioned, car payment, credit card & child support is all defined as debt. Right?
Thank you, your explanations are so easy to understand and straight to the point.
I'm so glad to hear, thank you for watching!
Your videos are very well done. Straight to the point and easily digestible. Thank you!
Ah, thank you so much Diandra :)
PERFECT. Finally understand DTI. Include your newly projected loan payment into it.
You forgot to count the child support with the total of debt and future house payment?
I think you're right, my bad!
@@WinTheHouseYouLove Does that mean child care (that parents pay to daycare) or child support as in alimony? or both?
I don't have no house payment
All your videos are very well explained. Thank you for making these
Glad you like them! Thanks for watching!
Hi Kyle! I love your videos. My DTI hovers around 38% after paying off some debt. Are lenders tracking how long an acceptable DTI is maintained?
Thanks! Lenders only want to see your DTI when you close on the home. They won't look at a history of it or if it changes after you close.
You HAve the best videos out there on the subject of home buying thx well informed good teacher
Thank you so much for watching!! :)
Thank you so much for taking the time to explain everything in so much detail.
You are so welcome!
Kyle I have to say this is a very helpful video and so easy to understand. Going to work on this today. Thank you!
Glad it was helpful!
Thank you for the great info..
You’re welcome!
Great video i have no debt no loans just monthly rent how should I calculate my DTI ?
Thank you for explanation. Great video.
Is IRS taxes payment plan calculated in DTI? Thank you.
I'm sorry but what was that math, I am confused...I got 2060 from those debts and it should be 41.2% with front end DTI and 20% back end DTI🤷🏿♀️ did I miss something? 🤔
Thank you for the content! Your handwriting is so cool! lol
😂 Thanks for watching!
Helpful video man but I have a question. Rather than going through all that math and time to figure out the dti. Why not just calculate 43% of the gross income. Then subtract all other debts. Then the amount whats left would be for your mortgage payment.
This is illustrative to help people understand how it works step by step
What is the usual way that lenders count income?
Do lenders average 2 years of tax return and then divide by 12 to arrive at monthly income, or do they take your last 3 paystubs and then average your monthly income off of that?
It depends on your income type! Email me with your scenario and I can help you out :) kyle@winthehouseyoulove.com
Wow!! Thank you so much for breaking it down so easily
Glad it was helpful!
I love your videos❤
I have a question... Why do they include rent as a DTI 🤔 You're not going to be paying rent while paying on a mortgage🤦♀️ I was told by a friend and I've only seen 1 video discussing DTI including your rent..Help me understand PLEASE 😩🙏
Rent is not included in DTI
Oh have I got an issue with this!
I can't qualify for a mortgage because I am told my debt-to-income ratio is too high!
I make a steady income of just $30. shy of a thousand dollars a month,I have $30. life insurance & a $45.cellphone-no loans,credit cards....
I can afford up to $565.monthly mortgage (with p&I,taxes & insurance included)and still have $100.left !
Clearly I can afford!
So why,oh why,am I told I can't qualify?
You make $30,000/mo?
You only have $100 left at the end of the month?
It's difficult to understand the wording here.
Great video! Thank you for the detailed breakdown! Really helped!
For my wife and I, lenders look at the lower of the two median credit scores (I think) But I'm assuming they would look at our combined DTI?
BTW, great videos!! Very helpful.
Yep, they look at the lower of the median and combined DTI if you are both on the loan. Thanks so much!
@@WinTheHouseYouLove gotcha, thanks again! Keep up the great work. Helping a lot of people out here!
This is an oversimplified view of DTI. You also will need to account in assets for any investments that you have made in publicly traded companies (market value of all publicly held securities), partnerships in a closely business plus a percentage of liquidity discount, vehicles held at 80% of the Kelly Blue Book Trade-In value (this is a liquidity discount), art and other collectibles. For debt, you should be conservative and not underestimate your debts (include cash needs over the next 24 months).
Lenders don't look at any of that in DTI.
I think you're thinking about a company's equity in accounting terms. Not mortgage DTI.
@@WinTheHouseYouLove makes sense, but the title of the video is too vague. You should specify that
This video is the textbook definition of debt-to-income ratio.
www.investopedia.com/terms/d/dti.asp
Hi Kyle. Great video!! How do lenders look at income when it comes to having a home you want to rent out? For example I want to rent out my primary home and purchase a new home. Mortgage is $980 and I can rent it out for $1500.
Usually for a conventional loan they can count rental income
I think total min debt will not be 1560.. It is total of 2060..hope you would have missed it
Thanks
Thank yo so much love your videos
Glad you like them! Thanks for watching. :)
Great video Kyle, thanks! Are there any exceptions as it relates to excluding debts from DTI? I have a car loan and I am the borrower but my dad has been making payments since I purchased over a year ago. Just wondering if that debt could be excluded under circumstances like that.
Yes, 2 main exceptions:
- if you can prove someone else has been making payments for the past 12 months
- if you have less than 10 payments left on an installment loan
Great job explaining your information on your training sessions. If I may make a suggestion, green looking ink is not your color. :) Maybe its just me or my laptop but it looked faded to the black and red colors that are bolder. Just a suggestion. Again, thanks for the great informative videos. You have helped me get caught up to speed after being out of the biz for a while.
Thanks, all the notes are typed now :)
Great video! It seems odd that FHA, which is targeted towards lower income people, will allow you to spend more of your income. I also have a question - when figuring out debt, what about collections? The new FICO scores take debt into consideration but I'm not sure what the percentage is.
Thanks!
The collection payment will be counted in the DTI. Sometimes 5% of the balance will be used as a monthly payment if there is none listed on the credit report.
49%!? Jeez so after taxes and 49% you are left with ~21% to live on... That's too aggressive. I hope no one is getting into a situation like that. Maybe only if you have tenants...
When you talk about credit card debt in regard to calculating DTI, are you talking about the monthly average you spend and pay off or the interest accrued by carrying a balance?
The minimum monthly payment on your card statement
Hey Kyle, Great videos, Thank you
I have a back tax payment plan with IRS , does it go into DTI calculation ? I am assuming yes, but not sure .
Also , will monthly credit card debt be the sum of the minimum payment on the CC ?
You're welcome! Yes, that will need to be counted in the DTI. And a credit card minimum payment goes in the DTI as well.
Great explanation! Thank you 🙏
Glad it was helpful!
Hey ,how are you writing in real time and it’s showing on the video at the same time???luv it
I'm just screen recording my iPad :)
Awesome videos thanks! Could you talk about what if the debt to income ratio for FHA loan is around 65%. I am planing to buy my first home but I am planing to rent out a room so it would be easier to make the payment. Do they count my plan as extra income after buying the property and renting out a room? Thanks a lot!
You're welcome, thanks for watching! If your DTI is above 56%, you'll need to either increase income or decrease debts. They won't be able to count that income unless you use a conventional loan.
Question regarding the DTI ratio, are you talking about the housing ratio or back-end ratio regarding the maximum limits like 56 % for FHA loan and 49 % for conventional loans?
Back end :) Back end matters a lot more than the housing ratio.
@@WinTheHouseYouLove thank u for the prompt response. your youtube channel has been very educative, more intersting than the 3 homebuyer education courses that i already took :-)
Nice video but shouldn't it be $2060 instead of $1560?
Yes I made an error
My lender is using net, not gross. Is this because we're self- employed? It's making this nearly impossible. Thank you!
It's gross of personal income. Which is often net of business income (depending on your business structure and how you pay yourself).
Here's my video on self-employed → th-cam.com/video/TXdUR6PcSd0/w-d-xo.html
Hi Kyle, Thank you for this great information. Say what’s that thing you are writing on, is that a remarkable tablet?
I'm glad you found it helpful! It's an iPad
Thank you!
You bet! :)
Thanks, but it seems to arrive at your future house pymt a lot of figures are missing from equation that needs to calculated?
So if one figures the house cost will be $200K then I think I can see how the numbers would be calculated to arrive at the future house pymts, and PITI?
Lenders only consider debts, not expenses, in a debt to income ratio.
The DTI is about what a lender will give you as a loan. You have to budget to figure out what you're comfortable spending.
So what is the point of the front end of the back end takes precedence
The front end is still used, primarily in manual underwriting, but you are much more likely to hit your back end ratio before the front.
If I'm renting a house - is that also debt thats included on the DTI ratio? And if it is included, What if the rent payment is divided between the siblings, do we still have to include the total rent payment into the equation or just the portion I'm paying?
Rent isn’t included :)
thank you! Your videos are always very informative and straight to the point. Very helpful!! I always look forward to your videos.
Thanks for the kind words and thanks for watching!!
Hi Kyle,
I am unable to figure out my DTI. I have an auto loan of 590. I am unable for figure out my credit card debt. I do all my payments like auto insurance, renter’s insurance and Mobile postpaid, Home Internet charges through my credit card. Will these come under credit card debt? Or my 3 credit cards statements due come under credit debt? Could you please help me with this?
Wow great video! I have no debts except what I put on my credit card each month. I do spend more than 50% of income thru credit card. Do they look at the debt to income ratio at the time I'm seeking the loan or do they look at my history for several months? I pay my credit card in full every month so it will be near zero when I apply. How does paying credit card in full affect debt to income ratio? Do I need to lessen the amount I spend per month eventho I completely pay it?
Thanks for watching. I suggest you watch this episode, you might learn something from it. :)
Here's the link:
th-cam.com/video/dLwwer3kWQI/w-d-xo.html
Will I need to count my credit cards minimum payment even if they're all $0 ?
Was the total debt calculated incorrectly? I am confused about where $1560 came from.
It's the max debt ($2,150) minus the current debt ($600) = $1,550
@@mediadonesimple9332 $400 in car payments + $200 in credit card payments
Win The House You Love I was speaking in reference to that first example where you used the child support example.
His math was off, but the concept is solid.
Awesome info
Can I apply this formula for self employed??
Yep!
@@WinTheHouseYouLove It is my understanding, based on talking with a lender, that the self-employment is calculated using the net income, not the gross.
Does car insurance count towards DTI?
Nope
Thank you
You're welcome!
Thanks you so much
You're welcome, thanks for watching!
good
Thank you so much for watching!! :)
how did you get 1,560?
I’m a soul proprietor and I get a 1099 so I write down my taxes. Would that still be calculated off of gross income?
The lender will use net business income
If I’m a co-signer on a car loan, will it be counted as part of my DTI if I can prove that the Primary Signer on the loan is the one who’s making the monthly payments?
If you can document 12 months of on-time payments, the car loan can be omitted from your debt-to-income ratio
@@WinTheHouseYouLove great. Thanks
I have a math question : why did you move the decimal point ?
It gave me 0.312
I know is a math matter but it would help if you explain
0.312 is the same thing as 31.2%
@@WinTheHouseYouLove thank you ! Basic math someone with me just explained to me , bro great videos !
Have the limits for conventional loans changed after all the craziness over the past few months?
Not that I've seen :)
does rent get included in the DTI or will the lender the future mortgage payment?
Rent, no. Future mortgage payment, yes.
Is Employer provided and fully paid for healthcare added to you personal gross income?
Only the income that shows in box 5 of your W2 is what will be used.
If you have 3 different credit cards , do you add 3 payments to your DTI ?. thank you in advance
Yes, the minimum payments for each
Hi, important question, I have a mortgage, trying to get a heloc, my dti is 43%, can i remove escrow since I have to pay it once a year so it could help my dti?
The lender will still count taxes and insurance in your DTI even if not escrowed
Can I refinance my car loan right before I apply for a home loan? Thanks
You can!
If I'm trying to qualify for a loan in order to purchase a multi family home, are the potential rents from the other units calculated into my gross income?
You can use 75% of the gross rental income to offset the future mortgage payment.
@@WinTheHouseYouLove Awesome, thank you!
Are closed accounts with balance included in to debt to income ratio calculation?
If marked as charged-off, no
Do they pay attention to charges off and do you have a video on that topic?
Is current rent payments included in dti ratio?
Nope. Thanks for watching! :)
Hello. Thank you so much for all of the videos. They are so helpful.
Would you please tell me where the 43% came from. Is that just a number you used as reference for this video, or is this a max number used by banks? Is there a difference in DTI for FHA versus Conventional?
Thank you so much for your time.
You're welcome! 43% was just a reference in the video.
Watch until the end and I cover that 😉
@@WinTheHouseYouLove thank you!
What if you are currently in school with a loan, do you add the loan amount?
Yep :)
Wait why did you put = 1,560 when you have 1000 in debt? Im confused.
I messed up the numbers in my notes, but the principal still applies
@@WinTheHouseYouLove ohhh ok thanks.
How did you add your iPad screen to main screen?
First, I screen record my iPad and use a drawing app called Adobe Fresco.
Then, I record the video while drawing any notes on the iPad.
Next, I import both the screen recording and video into Final Cut Pro. I overlay the screen recording on top of the video and sync them up so you can see me draw and talk at the same time.
@@WinTheHouseYouLove Thank you so much!
I have a business loan, will that monthly payment go towards my DTI?
Nope :)
@@WinTheHouseYouLove Niiice, now what if you don't escrow taxes, do they just add the mortgage payment into DTI? Or would they still add the taxes into DTI?
My neighbor wants 2 buy my house but he told tht he has 580 score do u THINK I should put the house on hold 4 him
Only if you’re wanting to wait to be generous. You most likely will sell your house quicker and for more money by putting it on the market.
Sell it to someone else
These lenders don't know nothing. Clearly if they did they won't calculate someone's income based off their gross knowing the govt gets 25% off top. And the net income is the true tangible income that determines what one can afford. This system is asshole backwards.
Risk based data is based on gross income and has a statistically low risk of default
Are you single?
Yes
@@WinTheHouseYouLove Well what do you know, so am I ;-) How can I slide into your DMs? Lol