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Too much debt?

How can I only pre-qualify for a $400 mortgage payment based on "too much debt" when I'm paying $1000 for my rent now? by gward866 from Walhalla, South Carolina. Jul 22nd 2020 Reply

Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,423 contributions

How much you qualify for is based not on what you are currently paying for housing. Loan amounts an individual (or couple) are limited by a number of factors. One of these is your Debt servicing ratio (DTI). Essentially this is the percentage of your gross income that is committed to servicing existing debt as well as the new debt the new mortgage adds to your obligations. Typically, most borrowers with decent credit are allowed to have a debt ratio of between 45% and 55% of their gross income committed to payments. Loan type and credit score drive whether you are at the top or bottom end of that range. For sake of example, if your Gross monthly income is $2,500 per month, and your loan type caps you at a 50% DTI, then you are not going to qualify if your total payments exceed $1,250 per month. In my example, after you commit payments to all of your debt, you still have $1,250 remaining to pay the rest of you bills, buy food, gas, etc. If you have $500 in other debt payments, then your new mortgage payment cannot exceed $750 per month. If your Rent is $1,000, your landlord doesn't care that your DTI is 60%, because your landlord is not lending you money that you might not be able to pay back. If you don't pay the rent, he evicts you. Banks do not want to foreclose, so they won't lend on higher DTI borrowers. I hope this helps ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in Arizona, California, Georgia, Oregon, and Washington. Need help in other states? We got you covered. NEXA Mortgage is licensed in 46 states ~ 480-889-9000.

Jul 23rd 2020
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,703 contributions

Not enough information here to even remotely give you a specific answer. There can be a bunch of reasons. Way to many to start guessing here. Call back the Loan Officer, they should be able to give you the exact answer.

Jul 27th 2020
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