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Are you like millions of Americans struggling to manage their debt - Debt Management can help
Are you like millions of Americans who are struggling to manage their debt effectively? Well, you don’t have to be! Debt management is important to understand so sit back and learn something new today. There’s nothing to be ashamed or embarrassed...
Bad Debt Loans -A Four-Step Programme to Eliminate Debts.
Mr. Henderson would often think of times when he had a good
credit history and there would be a long line of loan providers
desirous of offering debt consolidation loans. Things took a
sharp turn after he underwent a few defaults and CCJs. This...
Debt Settlement -- Why The Critics Are Wrong
After October 17, 2005, a lot of people are going to become interested in debt settlement as an alternative to bankruptcy. That's the date the new bankruptcy law goes into effect, and it means a rude awakening for many consumers seeking a fresh...
Different Ways Of Dealing With Debt.
Bills, creditors, debt collectors. Are you yearning for the days when all you had to worry about was the money in your piggy bank? If so, you are far from alone. Whether its illness, loss of a job, or simple overspending, it happens to the best of...
Do you need a debt consolidation loan?
If you are in financial difficulties due to debt or have built
up a variety of debts over time, a debt consolidation loan may
be for you. But before you take that route, you should consider
all the options.
However you got into debt -...
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How to Figure Debt to Income Ratio
Ever wonder how to figure out you debt to income ratio? Lenders use your debt to income ratio to help them evaluate your creditworthiness and debt load.
Mortgage lenders use your debt to income ratio to calculate what percentage of your income is available for your monthly mortgage payment after all of your other monthly fixed expenses are paid.
To calculate your total debt to income ratio take your total monthly fixed expenses and divide it by your gross monthly income.
Monthly fixed expenses are debts like your monthly mortgage payment, lease or car payment, credit card and any other revolving credit balances that will take more than eleven months to pay off and alimony or child support.
Your gross monthly income is what you make before taxes are taken out. This includes your wages overtime, commissions or any bonuses you get on a regular basis.
Your total monthly fixed expenses divided by your gross monthly income is your total debt to income ratio. It's what a lender calls the back end of debt ratio.
If you remove the monthly mortgage payment that is what a lender calls the front end debt ratio and that is how they calculate how much of a monthly mortgage payment you qualify for.
When you total your monthly debts, make sure you use only the minimum payment on your credit card statements. You don't have to include
utility bills or any debt that will be paid off in fewer than eleven months.
Here is a sample debt to income ratio calculation:
Total Gross Monthly Household Income = $6,000
Total Monthly Fixed Expenses = $2,160
$2,160 Divided By $6,000 = 36
Total Debt To Income Ratio = 36%
A mortgage lender likes to see your front end debt ratio between 25% and 28% to qualify for a mortgage loan. A good total debt to income ratio with that monthly mortgage payment factored in should not exceed more than 45%.
These figures can go higher if you have a high credit score because that means you have better creditworthiness and will likely pass a lenders home loan guidelines easier.
That's how to figure debt to income ratio and why it is important especially when you apply for a home loan.
Copyright © 2005 Credit Repair Facts.com All Rights Reserved.
About the Author
This article is supplied by http://www.credit-repair-facts.com where you will find credit information, debt elimination programs and informative articles that give you the knowledge to correct your own credit and credit report. For more credit related articles like these go to: http://www.credit-repair-facts.com/articles_1.html
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