Blog Category: debt ratios

car loan

How Much Mortgage Does My Car Loan Cost Me?

When a mortgage lender analyzes your finances to qualify you for a mortgage, they’re looking at all of your debt along with the new proposed mortgage payment. The other debts that they consider outside of your new mortgage payment are debts like minimum credit card payments, car loans, student loans, and any losses from other rental property. They do not look at debts like utility bill payments, car insurance or cell phone bills.

A mortgage lender will approve your loan allowing you to spend a certain percentage of your gross monthly income on your new mortgage payment and your debts.

Let’s see how much more mortgage you could qualify for if you did not have a car loan. Then you can see if paying off a car loan off  leaves you with the cash needed to  make a down payment and pay the closing costs to purchase a new property. Read More

But I Pay Off My Credit Cards Monthly

brian-martucci-mortgage-i-pay-off-credit-cardsSome clients get a bit frustrated that minimum monthly credit card payments are counted against them in their debt ratios, even if they pay off their credit card bills every month. First, the underwriter can’t assume that the client pays them off every month. Second, if you are spending about $3,000 every month on your credit cards, for example, and usually pay that amount off every month, and the minimum monthly payments are $150 a month, it seems pretty fair if you are spending $3,000 a month to only count $150 a month against you in your debt ratios.

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Mortgage Debt Ratios

Debt ratios are what banks use to qualify a mortgage borrower. Your debt ratio is what percentage of your gross income a bank will allow you to spend on a new mortgage combined with your existing debts. However, if you are self-employed they use net income.

The debts that a bank will count against you are car loans, student loans, credit card debt, the new mortgage you are qualifying for, and any other mortgage debt you may have. They do not count debts like auto insurance, utilities, cell phone bills, etc.

Fannie Mae usually has a maximum debt ratio Read More