In fact, don’t change anything before purchasing your new Nashville Real Estate home.  You have a much better chance of a successful closing if you keep your finances on a steady course. 

The lender will evaluate your qualification based on your debt-to-income ratio.    Current FHA guidelines place a maximum ratio of 41%.  This means that your debt load cannot exceed 41% of your income.  For instance:

Let’s say you earn $50,000 per year… $4,166.67 per month.  You want to buy a new home with a 30 year, $175,000 mortgage.  At 5.5%...this payment will equal $1,001.07.  Let’s add $200 for your taxes and insurance.  This brings your total payment to $1,201.07.

OK…now let’s say that you some debt:

Car payment                      $  300.00

Credit Card payments          150.00

Installment payments              75.00

Total debt                           $  525.00

When you combine your new house payment with this debt, you have a total debt load of $1,726.07 every month. 

Divide this by your total monthly income and it will give you your ratio.  $,1,726.07 / $4,166.66 = 41.40% Income-to-Debt Ratio

This ratio is already over your limit, but you could probably squeak by.  But what if your spouse needs a car?  Let’s consider what that would do to your ratios.  Adding just $200 for a new car payment would bring your debt load to $1,926.07…..and now you can only afford a mortgage of approximately $140,000.00. 

Can you see the huge difference this car purchase will make in your ability to qualify for a new home?

Another deal-killer could be moving money around.  Lenders like to see money in an account for a period of time.  So, don’t change banks or move accounts around unless it’s absolutely necessary.  And, even then, let your lender advise you on how to do it….always keeping a paper trail for your Nashville Real Estate transactions.  Please contact me with any questions you have about debt-to-ratio income.

Accent Realty Group

The agent to call when you need someone to go that extra mile!