Debt to Income

Shell Island, FL Debt to Income

Lenders look at an applicant's debt-to-income (DTI) ratio to determine if they can afford their Shell Island, FL mortgage payments as well as other debt obligations such as car loan payments and credit card payments. Shell Island, FL Lenders will have a maximum allowed DTI ratio, so it is a good idea to calculate your ratio on your own before you apply.

A DTI ratio uses your gross or pre-tax income for the calculation, and many debts are included to determine how much of a loan you can afford to repay. There are two types of DTI ratios: a front-end ratio and a back-end ratio, both of which are considered by your Shell Island, FL lender.

Debt to Income in Shell Island, FL

DTI Ratio in Shell Island, FL

A DTI ratio in Shell Island, FL considers your gross pre-tax income, plus other monthly income such as rental income or your pension. Divide your gross annual income by 12% to determine your gross monthly income.

The debt-to-income ratio includes fixed monthly debt obligations that should be on your credit report, not food, clothing or utilities. This means your DTI includes:

  • Credit card minimum payments
  • Personal loans
  • Car loans
  • Child support or alimony
  • Student loan payments
  • Home equity loans
  • Housing costs in Shell Island, FL
Debt to Income Ratio in Shell Island, FL

Back-End and Front-End Ratio in Shell Island, FL


 

Your Shell Island, FL lender also considers both your front- and back-end ratios to qualify you for a mortgage. The front-end ratio compares your pre-tax monthly income to your new PITI (principal, interest, taxes, and insurance) payment to determine how much you can afford to pay each month.

The back-end ratio is the one that includes your other monthly obligations such as loan payments and child support. The maximum allowed ratio is higher for the back-end DTI.

What Shell Island, FL Lenders Want to See

Lenders in Shell Island, FL typically want a front-end ratio that does not exceed 28%, and a back-end ratio of no more than 36%. If you have very good credit, you may be able to push these limits a bit higher. Guidelines tend to be looser with FHA and VA loans, which may cap the front-end ratio at 39% and the back-end ratio at 41%.

You cannot have a DTI ratio that exceeds 43% for your mortgage to be a Qualified Mortgage in Shell Island, FL.

Front End Ratios in Shell Island, FL

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