DEBT TO INCOME RATIO

Turbo Mortgage can help you do that math. Enroll in TURBO UNIVERSITY- COURSE ONE to get educated so you can understand your choices and their implications.

Calculating Your Debt-To-Income Ratio

After you’ve determined your monthly income and your monthly debt load, finding your Debt-to-Income ratio is a matter of basic math. Simply divide your monthly debts into your monthly income. Here are a few examples of the Debt-to-Income formula.

Calculating a 40% DTI

• Monthly W-2 income : $10,000 x 40% DTI= $4,000
• Less Monthly recurring debts : $1,500
• Equal Maximum Monthly housing payment $2,500

Simple Math: You can qualify for $2,500 monthly PITI(MIP) Principal, interest, taxes, insurance and mortgage insurance combined.
Turbo Mortgage can help you find out the maximum loan amount that this monthly payment will allow. Go to TOOLS on our home page and click on MORTGAGE CALCULATOR.

Calculating a 45% DTI

• Monthly self-employment income : $10,000 X 45% DTI= $4,500.00
• Less Monthly recurring debts : $2,000.00
• Monthly housing payment : $2,500.00
• Simple Math: You can qualify for $2,500 monthly PITI(MIP) Principal, interest, taxes, insurance and mortgage insurance combined.

Turbo Mortgage can help you find out the maximum loan amount that this monthly payment will allow. Go to TOOLS on our home page and click on MORTGAGE CALCULATOR.

Most CONVENTIONAL mortgage programs require homeowners to have a maximum Debt-to-Income of 45%. However, FHA mortgage programs maximum DTI’s are possible with DTIs of 50% percent or higher. In general, mortgage applicants with elevated DTI must show strength on some other aspect of their application, such as high credit scores or cash reserves in bank accounts and/or investments; post closing.
Also, note that once a loan is approved and funded, lenders n0 longer track Debt-to-Income ratio. It’s a metric used strictly for loan approval purposes. However, as a homeowner, you should be mindful of your income versus your debts. When debts increase relative to income, long-term saving can be affected.