Debt to income ration on any type of credit

[CreditBob]

With the recent mortgage and credit crisis I wanted to let everyone know what can help you improve the chances of getting approved for your major loans such as a student loan, personal loan, mortgage loan, or auto loan.

The lender looks at what is called "debt to ratio income". In other words the amount of income that you have coming in compared to the amount going out to pay bills.

HERE IS WHAT YOU DO:

Gross paycheck amount $ 2,000.00 X 40%= $ 800.00

Out of the $ 800.00 subtract the following:

Rent ot mortgage

cell phone bill

food

car payments

car fuel

car insurance

any loans-student, personal, auto, mortgage

any credit card accounts

anyone that you owe money

cable or satellite bill

all utilities

Let's say after adding all your bills up they total $ 550.00 per month. Take the $ 800.00 and subtract $ 550.00 which gives you $ 250.00 left over. The $ 250.00 is what your monthly payment can by up to. So for example if you want a car loan and the monthly payment is $ 300.00 then you will have to put down a higher payment to offset the $ 50.00 because you only have $ 250.00 that you can go up to for the maximum monthly payment that will be allowed by the lender.

STUDENT LOANS-EVEN THOUGH THEY MAY HAVE A DEFERRED PAYMENT IT IS STILL PART OF YOUR DEBT TO INCOME RATIO. SO YOU WILL NEED TO START PAYING ON THEM RIGHT AWAY. IN OTHERS WORDS YOUR DEBT TO INCOME RATIO WILL BE HIGHER. SO EVEN THOUGH THEY MAYBE DEFERRED A FAR AS PAYMENTS GO FOR THE NEXT 5 YEARS OR UNTIL YOU START WORKING, THAT IS NO LONGER THE CASE. THE BOTTOM LINE IS THAT YOU ARE IN DEBT.

STATED INCOME IS NO LONGER ALLOWED.

AUTHORIZED USER ACCOUNTS ARE NOT TAKEN INTO CONSIDERATION BECAUSE THE AUTHORIZED USER DOES NOT DEMONSTRATE THE FINANCIAL RESPONSIBILITY TO PAY ON THE ACCOUNT.

MONEY THAT PARENTS OR [PEOPLE GIVE YOU MEANS NOTHING ABOUT BACKING UP YOUR INCOME. YOU NEED PAYCHECK STUBS AND TAX RETURNS.

[Anonymous]

For what it's worth, I believe when lenders do the calculation they don't care about all the bills, just debt. Include rent or mortgage and all minimum loan/debt payments. This doesn't usually include grocery bills, gas, cable, etc. Just loans (auto, student, personal..) and minimum credit card payments..

[Anonymous]

In regards to Auto loans....they don't care anything about other monthly debt obligations....I've never had that question asked.

As far as authorized users...they can still help a persons FICO score which inturn shows credit worthiness (by just looking at the #'s). The new version hasn't rolled out yet which will eliminate that perk.

$$ from parents for buying a house is acceptable to help with the down payment, just not the monthly payment.

[Anonymous]

From experience, on any loan I have done, underwriters are comfortable with 48% DTI or less, as long as the disposable income is good (around $1,000 or more).  Disposable income is the monthly excess income after subtracting both existing debts and the debt you are applying for (the monthly payments are used to calculate DTI).  Disposable income plays an important part, because we may turn down somebody with 25% DTI with $400 in DI because that's just not enough to cover other expenses such as insurance, groceries, gas, etc.  We may approve somebody at 65% DTI with $3500 DI, because the DI's strength supports the DTI's weakness.  Also not all lenders will use gross income to figure DTI, some will use net income, that will jump the DTI up quite a bit.  I am not trying to discredit or argue with your post, however I personally believe that DTI and DI go hand in hand.  Great information though, this will maybe explain to some A+ borrowers why they didn't get approved on a certain application...

FYI, I only process 2nd mortgage/HELOC apps, CC's, Auto, and signature loans, I cannot say the same for 1st morgtages...