Debt To Income Ratio - Credit cards first entered my life during my freshman year of college. My first plastic way of paying for things gave me a credit line of $500. The closer that I got to that maximum amount, the more the limit increased. It is now years later and I’m lucky to even have a $500 balance on my cards. I’m in debt beyond belief. Though I seem to owe everyone in the world some sort of money, I haven’t ever had problems paying my bills. I may only be able to make my minimum payments, but at least I’m able to pay anything at all. I have an excellent credit score and I intend to keep it that way.
At 26 years of age, I attempted to buy my first home. I went FHA and figured that my income would be decent enough to be approved. My mortgage consultant took all of my personal information and after doing some figuring, informed me that my debt to income ratio was too risky for any lenders to want to give me money. I was shocked. I’d never made a late payment in my entire life and had a great credit score. All I wanted to do was buy a tiny house and I couldn’t because of my debt to income ratio. I was furious. Of course, I don’t blame the lenders. Between my credit card balances and student loans, I wouldn’t loan me any money either. As embarrassing as it was, I had to get my father to co-sign a loan for me so that I could be approved for a mortgage. My consultant told me that I needed to really dig into my financial situation and figure out how to make my debt to income ratio much more appealing to lenders. I wasn’t sure how to do that, but I intended to find out how.
I moved into my house, happily, and started to focus on how I could decrease my debt. I started to nail my credit cards before anything else because of the interest rates. Even if I could only afford to send an extra $10 each month, at least I was making a tiny dent in my debt to income ratio. I transferred my highest balances and interest rates to 0% interest rate cards so that I could pay off more per month than I was before. By saving about $40 per month from not having interest rates, my balances actually began to fall. It was a slow process, but worthwhile.
Three years later, I was looking for a larger house and to move up in the world. Since my debt to income ratio was more under control, I was able to qualify without having a co-signer. That was the happiest moment of my life. Figure out what your debt to income ratio is and attack it. Don’t let it hinder your future.
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