Having many monthly debt obligations not only prevents you from living on a comfortable budget, but it also prevents you from accomplishing other financial goals. Still, it’s not just the amount of debt you have that matters – it is how much debt you have relative to your income. If you’re considering buying a new house it is important that you care about your debt to income ratio for a mortgage.

In simple terms, debt to income ratio (DTI) is a simple calculation that compares your monthly debt obligations to your monthly income. To determine your debt to income ratio, you should add all your debt payments and divide the sum by your total gross monthly income, then multiply the resulting figure by 100.

For example, if the sum of all your debt is $2,000 per month, and your monthly gross income (i.e. salary before tax) is $5,000, then your DTI is 40%.

Back to the important question – why should you care about your debt to income ratio for mortgage? The following are the main reasons why:

DTI Determines Whether You’ll Qualify for Mortgage

Before taking on a new mortgage loan, it is important to know whether you can afford new debt. The best way to gauge your capability for taking on new debt is by determining your debt to income ratio.

Besides using your credit score, mortgage lenders also rely on debt to income ratio to establish whether you will be able to afford your loan. They will look at all of your monthly debt obligations, including mortgage payments, property taxes, utilities, and all other consumer debt.

The less consumer debt you have (credit cards, car loans, student loans, etc.) the more you will qualify for a mortgage.

Interested?

Do you want to know how much of a mortgage you qualify for? It is time for you to look for a mortgage broker in Edmonton. I am dedicated to helping borrowers address their concerns about mortgages. I can help you make smart decisions when investing and making long-term financial plans.

Contact me today with any questions.

If you’ve had a good relationship with your bank, then it’s only natural that you will turn to them for assistance- even with your mortgage. However, your bank might not always be your solemn savior. What will you do if your bank turns away your mortgage application? Of course, you need to find new lenders. If you haven’t used a broker before, you may be unaware of the benefits.

Mortgage Brokers for Competitive Rates

One of the benefits of choosing a broker over a bank is your access to competitive rates. When you go directly to your bank, you restrict yourself to the bank’s non-negotiable rates. It might be higher than the prices you’ve seen in their advertisements. Even after negotiations, you might not make progress.

A mortgage broker can shop around for the best rates, no matter your financial situation. Even if you have racked up debt, have a bad credit score, or lost your job, a broker will work around your circumstances. When you walk in a broker’s office after leaving the bank, you might expect the same rates. Imagine the surprise when the broker quotes a lower rate without haggling.

The Mortgage Broker Difference

The difference between the broker and the bank is simple. On the one hand, is a loan officer who works under the bank. Their goal is to get you to pay as much as possible. Bank employees also work on a commission basis, which means they will drive the rate as high as possible.

A mortgage broker, on the other hand, is not an employee of the bank or any financial institution. Since brokers have no affiliation with lenders, they will represent you. As such, the broker’s incentive is to serve you well so that you’ll come back for more services.

Getting the Best Rates

With a broker, you will receive the best rates from different lenders and choose a mortgage that works well with your financial situation. A broker will approach banks, trust companies, and credit companies to make sure you have a variety. Rather than dealing with a single lender, you can compare rates from different institutions.

What Is The Cost Of Hiring a Mortgage Broker?

Perhaps you are wondering if you can afford a broker. Maybe you’ve heard that they are expensive. You should know that banks or lenders pay brokers after you agree to work with them. A broker finds the best rates, and once you decide to place your mortgage with a lender, they pay the broker a finder’s fee. As the consumer, this means that you enjoy competitive rates without bearing the costs.

What Are The Advantages of Hiring a Mortgage Broker?

Access to multiple lenders and offers is one of the most significant advantages of hiring a broker. Interestingly, many financial institutions have a variety of products on the market. However, when you approach them without the knowledge, they will present an unconditional offer in the guise of a good deal.

Your broker knows all the offers on the table and understands their qualifications. Once the broker understands your financial circumstances, they can approach the bank confidently to ask for an offer. Applying for a mortgage through a broker will also save you a lot of time and energy. If you have problems with your credit rating and employment status, approaching the bank directly will only get you denied.

Were You Turned Away? We can Help

If your bank denied your mortgage application, I can help you.  Contact me anytime  to get your questions answered now.

Buying your first home is a big step. When you are ready to buy your first home, it is wise to work with an experienced professional to guide you through the process and help you to qualify for a first time home buyer loan. When you meet with a mortgage broker, you will then have a good idea of where you are financially and what it takes to qualify for a mortgage. If you aren’t sure, don’t hesitate to call us – we are always happy to help first time home buyers get on the path to home ownership! Contact me to get started getting your first time home buyer loan.

Here are some things to think about before meeting with a mortgage broker to start the pre-approval process.

Do You Have Savings Set Aside?

When purchasing a home, a downpayment is required. This is a percentage of the overall price of the home you are purchasing and is deducted from the total mortgage amount. A minimum downpayment of 5% is required. For example, if the purchase price of your home is $300,000, you will need a minimum downpayment of $15,000.

If you haven’t started saving, it is still worth your time to talk to a mortgage broker and see what other options are available to you.

In addition to your downpayment, you should have around $2000 set aside for closing costs (inspection, lawyer).

Can You Afford the Monthly Costs?

Buying a home means no more rent! But remember home ownership means replacing rent costs with a mortgage payment, homeowner’s insurance, property taxes, and utilities. Do some research to get a general idea of what those costs will be. Do you have room for these costs with your income and spending habits?

Could You Be Denied for a Mortgage?

There are some circumstances can cause your lender to decline your first time home buyer loan. Here are the top reasons for a lender to decline your application for a mortgage:

• too much debt
• credit issues
• low income

If you don’t meet the mark, your lender may be able to give you some alternative options, some of which include:

• requesting a larger down payment
• requiring a cosigner
• approving you for a lower home loan amount

What Information Do You Need to Meet with a Mortgage Broker?

Any lender will want to be sure that you’ll be able to pay the loan you’re requesting. To find out if you are eligible, the lender or broker will analyze your monthly costs and total debt obligation based on your financial records.

Mortgage lenders will look at a variety of pieces of information such as your:

• income before tax
• total debts
• monthly expenses
• credit score
• employment history

Get Pre-Approved for a First Time Home Buyer Loan

Ready to buy your first home? Need a first time home buyer loan? We at Dominion Lending Centres Mortgage Mentors are the leading mortgage lenders in Edmonton. Contact me for guidance on how to secure your first time home buyer loan today.