Posted on August 4, 2009 at 9:14 am Specifically, is debt to income ratio calculated differently if you have bad credit or what is the deal with that?

Posted on August 4, 2009 at 9:34 am To address the question, "How is debt to income ratio calculated?"- you must keep in mind a couple of things: 1) The back-end ratio- compares all of your debts to your gross monthly income. Total Debt/Gross Monthly Income= back end ratio Mortgage lenders have set this at 36%, so this figure is what you want to shoot for. 2) The front-end ratio- compares only your housing payment (rent or mortgage payment) to your gross monthly income. Total Housing Payment/Gross Monthly Income= front end ratio This has been set at 28%, so this figure is what you want to shoot for. And finally, lenders will then take a look at the 28/36 ratio to factor in both and see how much of a risk you are as a borrower.

Posted on August 5, 2009 at 3:47 pm To add tot he question- how is debt to income ratio calculated and whether or not your credit has anything to do with it- no it does not. It is based solely on the factors that Steven discussed.

Posted on August 6, 2009 at 12:14 pm It is very important to understand how debt to income ratio is calculated- especially if you are trying to get a low interest mortgage loan. The stronger the ratio is, the fewer points you will have to pay on the loan. A lot of people with poor debt to income ratios get sucked into these subprime mortgages that over time they can't afford to pay back anyway.

Posted on August 7, 2009 at 2:17 am Mortgage lenders utilize the 28/36 rule and it's used as a gauge to see is he or she is eligible to apply for mortgage.  Any rates below the standards set by financial institutions is a good signIn fact, the Federal Housing Authority grants loans to borrowers with a DTI of 29/41. However, If the customer's ratio is a bit higher, say, at around 37% to 40%, an individual may start struggling with paying for their debts. The customer may be “living from paycheck to paycheck” to sustain their lifestyle. Consider it a warning sign if your DTI ratio is more than 40%; help is needed to fix your current situation. Staying in the black may prove to be quite the daunting task. The higher the DTI ratio that an individual has, the more likely that their credit score would be lower.

Posted on August 7, 2009 at 4:17 am What is its relevence in my life as a consumer

Posted on August 7, 2009 at 4:27 am Lenders consider debt to income ratio crucial because it determines your likelihood of making monthly payments to them. They also take this into consideration once you apply for credit. Aside from that, the percentage determines how much they are going to lend you. As much as possible, the creditors also want to make sure that the loans they grant to you are affordable, by keeping payments to a manageable amount based on your income.

Posted on October 15, 2009 at 11:35 pm How can I achieve the best ideal DTI ratio that there is?

Posted on October 16, 2009 at 3:01 am You can achieve the ideal DTI ratio by increasing your monthly income. If it's possible, you may opt to ask for a raise from your current employer. You may also sell some items at home, hold a garage sale, take a part-time job, or perhaps do some small jobs such as gardening, babysitting, or plumbing. Having another job may sound taxing at first, but keep in mind that it only will be a short-term solution, not just to improving your DTI ratio, but for your financial situation. There may be a degree of difficulty in accomplishing this task, but at least, it would help in achieving your goal of becoming debt-free.

Posted on October 16, 2009 at 4:14 am How is debt to income ratio calculated with bad credit and with good credit? You mean if there's a difference?