Debt Ratios - Underwriting Fundamentals 101

Debt Ratios

Okay, So today we're going over debt ratios.

So as you know, or most of you do know, is that the lenders can only lend so much based on your debt to income ratio.

Okay. So every lender has their own rules.

Usually you have to be under 39 and 44%.

So 39 would be the GDS ratio, which is pretty much what that means is how much the house costs you compared to your total income.

And then total debt service ratio. So that number is usually at 44 or below.

That's the total number of deaths, housing plus like credit cards or car loans that your customer may have.

Okay. Now, if you're buying a home for less than 20% down, that's pretty much the standard.

All lenders, but every lender has their own calculation.

For an example, I'm not going to call out any lenders here, but some lenders factor in a minimum payment against all of your open credit, whether you're using it or not.

So if you go to this lender and so you've got 50 K of open credit cards and lines of credit and you're not using it, you're going to be penalized by going to these other lenders where we have additional lenders still, you know, major banks and things like that that we work with, that the only factor in a minimum payment on the money that you're using.

So even though all the banks, when you're doing 5% down, have the 39 44% debt ratio, they all look at the application differently.

So this is why mortgage brokers and mortgage agents are so important and special in this market, because for a buyer like you to just to go to one lender, you don't necessarily know the rules, you don't really know the policies.

So that lender's going to say, here's what you can get and that might be good enough.

That might give them what they're looking for. But more often than not, it's not right.

We have a lot of clients like you, that realtors will refer to us because they couldn't get enough at their lenders or banks.

And then we get people like you quite a bit more just by knowing all the lenders policies and maximizing the debt ratios for you.

Now, to wrap this up, because we have to move on is when you have 20% down or more, the debt ratios increase.

The lenders have different capacity limits. Some still are at the 3944. Some will go to 50% debt ratios.

Some will even go to 6065 and make exceptions up to 70, depending on your purchase, the type of lender, the rate that you're're willing to accept all of that stuff.

So please keep in mind that usually, no matter what your scenario is, we can be creative, especially if they have a large down payment and we can make their debt ratios work in most cases.

Not in all cases, but in most cases.

Talk to a Mortgage Professional

So if you are ready to begin hunting for a mortgage and need help finding the best lender to work with your ratios, we are here to help you.

All you need to do is book a free strategy call at the link below and we will gladly put you on the right path towards strong mortgage financing.

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@the_unstuck_investor How debt ratios work and their importance #canadianrealestateinvesting #mortgageagentontario #mortgagetipsforyou #canadianmortgagerates w de#Hb ♬ original sound - The_UnStuck_Investor