Your debt to income ratio is all of your monthly debt payments divided by your gross monthly income. Debt is considered money you borrowed and have a responsibility to pay back. This would exclude utilities, car insurance, etc. The types of debt that are factored in include credit cards, installment loans, student loans, auto loans, child support, alimony, etc. Your debt to income ratio should be well below 50%. Ideally, you should be aiming for debt that is less than 36% of your income. Even if your ratio is higher than desirable, you still can get approved for a mortgage.
You increase your likelihood of getting approved if you put more money towards the down payment. Ask your lender if they offer down payment assistance. For FHA and VA loans, the entirety of your down payment can be a gift.
You can increase your income by taking on a second job, working overtime, or asking for a raise. You can also market your expertise and skills as an independent consultant.
Pay off your debt as quickly as possible. This will make your DTI ratio temporarily increase, but it will benefit you in the long run. Prioritize paying off your debt with the highest interest rates first. You should be monitoring how much credit you utilize on your cards and keep it below 30%. Try reaching out to your credit card companies, insurance companies, and utility companies to see if they will decrease your interest rate or monthly payments. If you have been with that company for a long time and have a stable payment history, you may qualify for a reduction. See if they have any promotions going on as well.
Consider consolidating your debt into your mortgage. Mortgage interest rates tend to be significantly lower than credit card interest rates. Also, you can write off your mortgage interest during tax season, which you cannot do with credit cards.
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