Welcome to a Quickie Lesson.
What is debt to income ratio?
We don’t have to over complicate it; debt to income ratio is exactly as it sounds, how much debt do you have in comparison to your income. This represents how much money you make that can actually cover that debt and why is that important?
When a lender is looking at potentially giving you a loan, they are trying to ascertain how much risk they’re going to take on; so based on how much debt you have and the income you make, they want to see if it can cover those debts and potentially still be able to pay your monthly mortgage.
Again, we don’t have to over complicate it. Your debt to income ratio is how much debt do you have in comparison to how much income you actually make.
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