Your Questions About Lower Debt To Income Ratio

Mandy asks…

Will a low income to debt ratio get me a better rate and/or lower mortgage payment?

richmama answers:

No it needs to be a lower debt to income ratio not the other way around, if you have a lot of debt and very little income then getting approved will be the key here.

Depending on your credit score will depend on your lower rate, anything right now over a 740 will get you no points and a better interest rate.

Joseph asks…

To lower my debt to income ratio?

should i pay off a low limit credit card or make a payment on a high limit card. like pay off a whole credit card with $2000 or pay $2000 towards a $5000 card

richmama answers:

Your debt to income ratio will be the same after you pay the $2000 towards your total debt.
Great that you are reducing your debt by $2000… But how you slice it up doesn’t change the outcome.

But… To pay off a maxed out account versus one that still has credit available is better for your credit score.

Pay off the card that is maxed out and see your score recover. If the cards are not maxed out then try to bring both balances towards the 30% of your credit limit line. That will also improve your score.

Chris asks…

How does a person calculate their debt to income ratio?

So here’s the deal. I applied for a home loan and was denied because of debt to income ratio. The confusing part for me is that my rent is more than the monthly calculated payment. I have a high credit score (almost 750), and 2 vehicle pymts. I suppose the real ? is how do I lower my ratio so as to qualify for the mortgage loan. any ideas would be appreciated.

richmama answers:

The number they used was your expected monthly payment (including taxes and insurance) plus your car payments, plus any credit card payments if you carry a balance.
You can pay off one of your cars to improve the ratio, or look for a cheaper house.
Your rent is not relevant.

Thomas asks…

trading in a car for lower payment with high debt to income ratio?

I wanted to know if I would have any problems trading in my car for one with a lower monthly payment. My payment is $350 now and I would be looking at about $200 payment on a different car. If I have high debt to income ratio, will I have a problem getting a loan? or will they consider the reduction in payment when approving the loan?
I am just starting to look into this, and I have not talked to a financial institution yet. I was hoping that someone could tell me in general if you are trading in a car with a payment, if they do not count that payment against your debt to income ratio.

richmama answers:

You are over-analyzing this too much. Go to a dealership and find out. No one here can answer that question for you. WAAAAAY too many factors involved.

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