How Debt-to-Income Ratio Affects Your Mortgage Application
Most people who buy new homes in Copper Canyon TX use a mortgage to pay for their home. If you’ve ever applied for a mortgage or even looked into applying, you probably learned that your debt-to-income ratio is an important factor in qualifying for a loan. Why does this number matter, and how does it affect your application?
First of all, a quick definition: Debt-to-income ratio is simply the amount of money you owe compared to the amount you earn. This is used to determine how much money you have available each month to pay a mortgage after all your other debts are paid. A low debt-to-income ratio is good, since that means you don’t owe a lot of money to creditors each month compared to your income. A high debt-to-income ratio means that a lot of your monthly income goes to paying down your debts.
The reason this number matters on your mortgage application is that lenders want to see that you have plenty of money available each month to make your house payment.
How can you improve your chances of getting approved for a mortgage if your ratio is high? Pay down some or all of your other debts before you apply. This will free up more income to pay your mortgage. With a lower debt-to-income ratio, you’ll have a better chance of qualifying for a loan. You could also be offered a lower interest rate, which will help you save money over the life of your loan.
It’s also a good idea to avoid taking on new debt while you’re shopping for a home. Don’t make large credit purchases or take out a new car loan. On the flip side, if you plan to shop for a house in the near future and your ratio is on the high side, do what you can to increase your income. By taking these steps you can put yourself in a better position to purchase the home you want.
Are you looking for a new home in Copper Canyon TX? We have beautiful new homes in Vickery, a gated community of luxury homes by John R. Landon Homes of Distinction. Live in beautiful surroundings with green spaces, ponds and walking trails. Homes in Vickery start in the $960s.
Call or text Landon Homes today at 469-804-5534 to start planning your new home in the Vickery community of new homes in Copper Canyon TX.
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