How to qualify potential home buyers using debt to income DTI calculation. This is a great time saving tips for real estate agents, realtors.
Before starting your car engine and hitting the road for showings, Agents should know if potential buyers are qualified for specific loan amount in case they obtain financing. One of the factors that lenders look at when qualifying borrowers is debt to income ratio or DTI. In short, DTI ratio is the amount of debts dividing by one’s incomes.
As you may have guessed, lenders like DTI to be low. For conventional loans, ideal DTI is below 43%. FHA loans may be stretched up to 55%.
When qualifying borrowers, agents need to know how to compute Debt to income ratio. Here is how:
Add up all of borrowers monthly debt obligations (recurring debts)
Do not include anything like utilites, phones, dining, traveling, grocery shopping, or other cash expenses.
Add up all sources of income
Now divide the total debt by total income. This should be your DTI.
