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how do you calculate monthly debt?

i have a car payment and I pay off my credit card charges every month. Do you count credit card charges as monthly debt?
By sandykohler715 from MD Jul 15th 2014
Reply

Yes. The minimum monthly payment would be used to calculate your debt to income ratio.

Jul 15th 2014

Yes, we are required to use what ever shows on the credit report as the minimum monthly debt. However, if you payoff your credit cards every month in full you should do it BEFORE the billing cycle ends! When the CC company sends you their bill, they send it to thousands of other clients as well, and that is when they send their "tapes" to the credit bureaus to report your balances. When you pay if off the next week it is Never reported. You run your bill up and then the cycle starts again. I suggest paying them before the billing cycle so your bill states "thanks for your payment of XXX, your balance is now $0" and $0 gets reported to the bureaus and your credit scores could possible increase. Call me if you need more assistance.Scott Kinne - First Heritage Mortgage - 703-293-6146 - NMLS# 182351.

Jul 16th 2014
by

The short answer is yes. Now the long answer on how your monthly debt impacts the approval process. Under the Ability-to-Repay-Rule, lenders are required to look at your income, assets, savings, and debt and weigh those against the monthly payments over the long term. Your debt to income ratio is a formula lenders use to determine how much money can be used for a monthly home loan payment after you have met your other monthly debt payments.How to figure the qualifying ratio?While the Ability-to-Repay Rule does not mandate debt-to-income ratios. The rule simply requires mortgage lenders to evaluate a borrowers debt-to-income ratio and use judgment about how much debt a consumer can afford to take on. Usually, underwriting for most mortgage programs allows for a qualifying ratio of 31/43.The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the full payment.The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. Recurring debt includes things like auto/boat loans, child support and credit card payments.

Jul 16th 2014

Yes, the minimum monthly payment on all debt accounts will be used when calculating your overall debt-to-income ratio.

Jul 16th 2014

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