Credit and Debit Card Ratings

What is a debt to income ratio? Why is the 43% debt-to-income ratio important?

A debt-to-income ratio is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.

To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.  For example, if you pay $ 1500 a month for your mortgage and another $ 100 a month for an auto loan and $ 400 a month for the rest of your debts, your monthly debt payments are $ 2000. ($ 1500 + $ 100 + $ 400 = $ 2,000.) If your gross monthly income is $ 6000, then your debt-to-income ratio is 33 percent. ($ 2000 is 33% of $ 6000.)

Evidence from studies of mortgage loans suggest that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43 percent debt-to-income ratio is important because, in most cases, that is the highest ratio a borrower can have and still get a Qualified Mortgage.

There are some exceptions. For instance, a small creditor must consider your debt-to-income ratio, but is allowed to offer a Qualified Mortgage with a debt-to-income ratio higher than 43 percent. In most cases your lender is a small creditor if it had under $ 2 billion in assets in the last year and it made no more than 500 mortgages in the previous year.

Larger lenders may still make a mortgage loan if your debt-to-income ratio is more than 43 percent, even if this prevents it from being a Qualified Mortgage. But they will have to make a reasonable, good-faith effort, following the CFPB’s rules, to determine that you have the ability to repay the loan.

,A debt-to-income ratio is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.  To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.  For example, if you pay $ 1500 a month for your mortgage and another $ 100 a

This article by the CFPB was distributed by the Personal Finance Syndication Network.


Personal Finance Syndication Network

Author: Shane Tripcony

  • What is a debt to income ratio? Why is the 43% debt-to-income ratio important?

    What is a debt to income ratio? Why is the 43% debt-to-income ratio important?

    A debt-to-income ratio is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.

    To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.  For example, if you pay $ 1500 a month for your mortgage and another $ 100 a month for an auto loan and $ 400 a month for the rest of your debts, your monthly debt payments are $ 2000. ($ 1500 + $ 100 + $ 400 = $ 2,000.) If your gross monthly income is $ 6000, then your debt-to-income ratio is 33 percent. ($ 2000 is 33% of $ 6000.)

    Evidence from studies of mortgage loans suggest that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43 percent debt-to-income ratio is important because, in most cases, that is the highest ratio a borrower can have and still get a Qualified Mortgage.

    There are some exceptions. For instance, a small creditor must consider your debt-to-income ratio, but is allowed to offer a Qualified Mortgage with a debt-to-income ratio higher than 43 percent. In most cases your lender is a small creditor if it had under $ 2 billion in assets in the last year and it made no more than 500 mortgages in the previous year.

    Larger lenders may still make a mortgage loan if your debt-to-income ratio is more than 43 percent, even if this prevents it from being a Qualified Mortgage. But they will have to make a reasonable, good-faith effort, following the CFPB’s rules, to determine that you have the ability to repay the loan.

    ,A debt-to-income ratio is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.  To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.  For example, if you pay $ 1500 a month for your mortgage and another $ 100 a

    This article by the CFPB was distributed by the Personal Finance Syndication Network.


    Personal Finance Syndication Network

  • Your route to security

    Your route to security

    Setting up your home network? To keep it secure, don’t forget about your router.

    Why pay attention to that little box with the flashing lights? Your router lets you connect with the internet and communicate with other devices in your home. So, it’s your first line of defense in guarding against attacks by identity thieves and hackers.

    How can you make your router more secure? Start with these steps:

    • Change the name of your router. The name of your router (also called the SSID or service set identifier) is usually a default ID assigned by the manufacturer. Change it to something only you know.
    • Change your router’s pre-set passwords. Your router also usually comes with a default password. Hackers know these default passwords. So, change yours to something unique, long and complex – think at least 12 characters, with a mix of numbers, symbols and upper and lower case letters.
    • Turn off any “remote management” features. Some routers offer remote management for tech support. Don’t leave these features enabled. Hackers can use them to get into your home network.

    Once your router is set up, don’t just stick it in a corner gathering dust. Instead, keep it up to date. Over time, the software that comes with your router may need updates. Visit the manufacturer’s website periodically to see if there’s a new version available for download. Or register your router with the manufacturer and sign up to get updates. If you lease a router, check if your internet service provider issues updates automatically.

    For more tips on router safety and computer security, check out the FTC’s updated article on securing your wireless network. And if your system is hacked and your information exposed, visit identitytheft.gov for a recovery plan.

    This article by the FTC was distributed by the Personal Finance Syndication Network.


    Personal Finance Syndication Network

Credit and Debit Card Ratings