The Term Debt to Income Ratio Explained

The Term Debt to Income Ratio Explained

One of the many reasons to hire a real estate agent is so they can help you understand lender and real estate jargon. If you’ve never applied for a loan before, you have likely never heard the phrase, “Debt to Income Ratio”. These words may determine whether or not you will qualify for a loan, or at least the interest rate you will receive on the loan.

Debt to income ratio looks like this:

The amount of money you bring in every month
compared to
The amount of money you spend every month.

Why does this matter?
This number will help lenders determine two things:

  1. Your eligibility
  2. The likelihood you will be able to repay the loan

To get this ratio, let’s play with some numbers:
You make $3,000 a month (income)
You spend $1,000 a month on rent, other loans, etc. (debt)
1,000 / 3,000 = 33%

If you’re looking at your debt to income ratio, then chances are you’re wanting to buy a home.  Call me, Jill Bell, at 479.799.3023.  I’d love to put you in touch with a local lender to get the process started!

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