There are many qualifications that potential buyers have to meet before taking out a mortgage. Among these is debt to income ratios that many people are not aware of. For a traditional loan the ration is 28/36.
What does this mean? It means that your mortgage payment should not exceed 28% of your income and your total long-term debt including that of your credit cards and your mortgage payment should not exceed 36% of your monthly income. So how does your debt to income ratios measure up?
It is smart to eliminate or minimize credit card before applying for a mortgage loan. Put yourself on a budget and pay more than the minimum balance due to hack away the debt. Add up all your credit card debt and other loans and divide it by your total monthly income.
If it is not below 8% (the debt percentage allowed for other debts after excluding your 28% mortgage) you may need to concentrate on lowering and eliminating the debts in order to get your percentage into those ratios before applying for a loan.
If you have significant amounts of debt that you are paying to several creditors, it may be a good idea to look into consolidating your debt into one low monthly payment through a legitimate consolidation company.
Just investigate the consolidation company and see what fees they charge for their services and make sure it doesnt count against your credit.
If your other debt obligations arent an issue then make sure that the home you want to purchase doesnt produce a mortgage that may exceed your 28% for mortgage to income ratio.
If it does, you may need to consider downsizing or paying a larger downpayment.
The first thing to do is a self analysis of your current financial situation to see what adjustments need to be made, if any at all and then come up with a strategic plan to get your debt into these ratios.
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