What exactly is a debt to income ratio?
02-08-2010, 06:30 AM
#1
Senior Members
Thread Starter
Join Date: Dec 2005
Location: White Hall, Arkansas
Posts: 298
Likes: 0
Received 0 Likes
on
0 Posts
My Ride: Retired 2008 535i Titanium-silver with sport, premium, steptronic, NAV, HUD
Retired 2006 525i
Does this debt to income ratio include the home mortgage? And is this ratio pre or post-tax?
How about the cars? Thanks.
How about the cars? Thanks.
02-08-2010, 06:56 AM
#2
Contributors
Join Date: Aug 2008
Location: Orlando, FL
Posts: 1,174
Likes: 0
Received 0 Likes
on
0 Posts
My Ride: 2008 550i sport
Generally speaking, this is used by financial institutions to establish credit worthiness and mostly used when applying for mortgages. It is typically done with simple math using gross income against all outstanding debt, including cars, mortgage(s), credit cards, unsecured/secured loans, etc.
General acceptable debt-to-income ratios is 33/38 meaning that housing expenses can't exceed thirty-three percent of your monthly income. Your total monthly payment can take no more than thirty-eight percent. There is math involved and if you have a decent down payment (20-30%)and/or excellent credit, these numbers flex.
General acceptable debt-to-income ratios is 33/38 meaning that housing expenses can't exceed thirty-three percent of your monthly income. Your total monthly payment can take no more than thirty-eight percent. There is math involved and if you have a decent down payment (20-30%)and/or excellent credit, these numbers flex.
02-08-2010, 08:27 AM
#3
Contributors
Join Date: Nov 2008
Location: Europe
Posts: 1,594
Likes: 0
Received 0 Likes
on
0 Posts
You know what was weird? When I lived in America, I opened a bank account for my salary to be paid into and after a while took their offer of a credit card but I never used it. After a couple of years they asked me if I wanted a free credit check (some law had allowed up to 3 free credit checks or something). I got one and it wasn't perfect. I asked why and they said something about me not having had any debts. So apparently, having debts and paying them off on a regular basis is better than not having any at all. How strange is that?
02-08-2010, 08:34 AM
#4
Contributors
Join Date: Aug 2007
Location: Atlanta Burbs
Posts: 1,871
Likes: 0
Received 0 Likes
on
0 Posts
My Ride: 08 550 Carbon Sport Almost everything factory, but no sound upgrades.
02-08-2010, 09:45 AM
#5
Contributors
Join Date: Jan 2005
Location: San Jose, California, USA
Posts: 4,119
Likes: 0
Received 0 Likes
on
0 Posts
My Ride: 2008 Porsche 911 Carrera S Convertible. Midnight Blue, 6 Speed.Retired - 2007 997 Carrera S, Midnight Blue, Grey leather, premium audioRetired - 2007 550i, Monaco Blue over Beige, Navigation, Logic 7, Cold Weather Pack, Comfort Access, Sport Package
Model Year: 2008
You know what was weird? When I lived in America, I opened a bank account for my salary to be paid into and after a while took their offer of a credit card but I never used it. After a couple of years they asked me if I wanted a free credit check (some law had allowed up to 3 free credit checks or something). I got one and it wasn't perfect. I asked why and they said something about me not having had any debts. So apparently, having debts and paying them off on a regular basis is better than not having any at all. How strange is that?
02-08-2010, 01:06 PM
#6
Contributors
Join Date: Sep 2008
Location: Massachusetts, USA
Posts: 2,718
Likes: 0
Received 1 Like
on
1 Post
My Ride: 2006 525XI, Jet black on Dakota beige. Premium and winter packages. I consider myself a purist and intend to keep my car absolutely stock and shiny.
2008 328I Convertible, Sapphire black on beige interior. Premium package, NAV, iPod adapter.
Retired: 2002 325I, Titanium silver on black leather. Premium package. Absolutely stock and proud of it.
You know what was weird? When I lived in America, I opened a bank account for my salary to be paid into and after a while took their offer of a credit card but I never used it. After a couple of years they asked me if I wanted a free credit check (some law had allowed up to 3 free credit checks or something). I got one and it wasn't perfect. I asked why and they said something about me not having had any debts. So apparently, having debts and paying them off on a regular basis is better than not having any at all. How strange is that?
02-09-2010, 01:19 AM
#8
Contributors
Join Date: Nov 2008
Location: Europe
Posts: 1,594
Likes: 0
Received 0 Likes
on
0 Posts
You'll probably have also suffered through having a short credit history in addition to sixcard's point in his post. The model here is based on predictability and precedent - anyone with too short a history, or anyone without a verifiable ability to manage debt, is going to struggle. It's not how responsible or careful you are or may be, - it's all about your ability to demonstrate it.
I feel like I've hijacked this thread and I'm feeling guilty for it.
02-09-2010, 02:25 AM
#9
Contributors
Join Date: Aug 2007
Location: Atlanta Burbs
Posts: 1,871
Likes: 0
Received 0 Likes
on
0 Posts
My Ride: 08 550 Carbon Sport Almost everything factory, but no sound upgrades.
$50K in savings doesn't mean anything in this case. If you never used credit, the credit unions probably don't even know about you or the $50K.
sixcard
sixcard
02-09-2010, 04:18 AM
#10
Contributors
Join Date: Nov 2008
Location: Europe
Posts: 1,594
Likes: 0
Received 0 Likes
on
0 Posts
Glad I don't have any plans to take on any kind of credit in the future then. Having not had any since about 1991 I might struggle to get any (except from my own banks).