![]() Because of the possibility of human and mechanical error as well as other factors, this information is provided "as is" without warranty of any kind and no representation or warranty, expressed or implied, is made, nor should any be inferred, as to the accuracy, timeliness, or completeness of this information. Reference should be made to the official statement and operative documents of each series of bonds referred to herein for complete information on that issue. Learn more about all the ways the Agency can help make home ownership a reality for you at Disclaimer (please scroll and read, then proceed below)Īll information contained on the following Web pages is obtained from the Agency’s books and records, and is believed to be accurate and reliable. The NC Housing Finance Agency offers mortgage products that can help make it more affordable. As a bonus, paying down debt can also help increase your credit score, another important factor for lenders.Įducating yourself about mortgages, financial health and the home buying process is an important first step in becoming a successful home owner. When you have less debt taking up your monthly budget, your debt-to-income ratio will decrease. For example, focus on paying off your credit card debt to free up more of your monthly funding. While preparing to hopefully buy a home, focus on paying off debts, especially unsecured debts, to decrease your monthly debt payments. If your debt to income ratio is too high to qualify for a home, the best things you can do are to increase your income or pay down your debts. How Can I Improve my Debt to Income Ratio? Even though this ratio might be comfortable for a lender, to achieve long-term financial stability, make sure your debt-to-income ratio is comfortable for you, too. Your proposed mortgage payment should take up no more than 28 percent of your monthly debt. Keep in mind, though, that the percentage is for total debt, including your mortgage payment. In general, a debt-to-income ratio of 43 percent is the limit for buyers to qualify for a mortgage, although a ratio of less than 35 percent is preferred. That means that they need to ensure they are making a good investment when they provide a mortgage loan. Mortgage lenders aren’t loaning money out of kindness, it is a business transaction for them. This number helps lenders decide if you can afford to pay back the funds that you borrow. A higher ratio might indicate that you have too much debt to handle already, and that you might not be able to pay additional debts. With fewer dollars tied up in your debts, you have more discretionary income, which is a good sign to lenders. Now you know what your debt-to-income ratio is, but what exactly does that mean? A lower debt-to-income ratio indicates better financial health, as it means that a smaller percentage of your income goes toward debt payments. In this case, your debt-to-income would be 33%. Then, multiply that result by 100 to find your debt-to-income percentage. For example, if you owe $500 per month in debt payments and bring in $1,500 per month before taxes, your debt-to-income ratio would be. ![]() Your ratio is your total monthly debt payments (like credit card payments, car payments and other debt) divided by your gross monthly income, that is, your pay before taxes are deducted. How Do I Calculate My Debt-to-Income Ratio?Īlthough it might seem complicated, the way to calculate your debt-to-income ratio is fairly simple. ![]() This number compares the debt that you owe with the amount of money you have coming in to provide insight into your ability to pay off debts in the future. But what exactly is this number and how does it impact your potential mortgage financing? Read on to learn about your debt-to-income ratio and how yours might impact your home purchase.ĭebt-to-income ratio isn’t just a real estate and finance buzzword-it’s an important metric to determine your financial health. One of the most important numbers to your lender is the debt-to-income ratio. If you’re thinking about buying a home in North Carolina, especially your first home, you may have noticed in your research that there are lots of things that a potential lender will look at to determine if they can lend to you and how much. ![]()
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