Top
Follow Me
Mortgage Market Update

click for larger imageThe rate markets are under pressure again this morning. The recent spike in interest rates adds more confirmation to our forecasts that the lows in the interest rates markets are now in place and rates are unlikely to fall to new lows. The recent stampede to the safety of US treasuries became excessive; the run down in rates was mostly in treasuries but mortgage rates benefited as the outlook for the US economy hit new lows in July and August. A lot of concern the US economy would double dip and fall back into text book recession sent investors, both domestic and foreign, to the safety of bonds.  There just isn't much room left for improvement, but a lot of room for rate to go up.  I would Strongly advise capitalzing while you can.

Want to know more on how the Mortgage Market directly effects mortgage rates or need an explanation of the candlestick chart above? Send us an email and we'll gladly provide an in depth article.  Realtors, ask about a detailed presentation on the Mortgage Market at your next office meeting.

Account
« Will Griffin - Client | Main | Geraldine Kriegbaum ~ Coldwell Banker »
Monday
Mar082010

Debt-to-Income Ratio . . . Is that a bad word?

DateMonday, March 8, 2010 at 1:38PM

The lending world used to consist of strict guidelines.  It was all black and white, no gray area on qualifying.  The past few years lenders have lived in the gray area and we’ve all been spoiled to the “new way” of qualifying.  You don’t have a job, don’t worry about it . . . you didn’t pay your last mortgage, ah, that’s ok . . . you don’t have any money now while paying only $500 rent and you would like to buy a $300,000 house, sure, we can make that happen. 

Those were the days, right?!!!  In the past 12 months EVERYTHING has changed and it continues to change on a daily basis.  Our beloved, lenient “all qualifying” FHA loans are now undergoing major changes as well.  Now in effect, the maximum debt to income ratios for FHA financing through Premier Lending is 50%.  There are limited exceptions and compensating factors taken into consideration.  In the past it was not uncommon for a buyer to be approved for FHA financing with debt to income ratios as high at 62%.

So, what is a debt-to-income ratio?  Well, if you’re in the market to buy a house anytime soon, you need to know!  Your debt-to-income ratio (often abbreviated DTI) is the percentage of your gross monthly income being used toward paying off debts.  When purchasing a home, this includes your new total monthly mortgage payment.  Here’s an example:

If your gross monthly income( BEFORE TAXES) is $5000 and your current monthly obligations total $1200, you will have an estimated $1300 (max) remaining for a potential mortgage.  ($5000 X 50% - $1200 = $1300)  The $1300 maximum mortgage payment INCLUDES taxes and insurance for your new home.

The debts included in a debt-to-income ratio are: car payments, personal loans, student loans, credit card minimums, child support, alimony, etc.  Monthly expenses such as gas, utilities, and insurance are not considered monthly obligations toward a debt and are not used when figuring the DTI.

Now before we all get bent out of shape and write our congressman on these changes, take into consideration that the qualifying debt-to-income ratios several years ago were a tight 36% . . . now, 50% doesn’t look so bad after all does it?

Without question, this is an ever-changing market we find ourselves in . . . make sure you trust your financing to a professional!



 

AuthorPamela Crim | Comments Off |
tagged , , in ,

PrintView Printer Friendly Version

EmailEmail Article to Friend