If you are considering purchasing a home soon, you need to be familiar with your debt-to-income calculation. Understanding this simple math formula could mean the difference between getting approved or getting denied for a home loan.
The discussion below will explain how to calculate this ratio and how it is used by mortgage lenders to approve people to buy a home.
The debt-to-income ratio, also called the DTI ratio by the mortgage industry, is a comparison between how much money people are making versus how much is being spent on debt.
The formula looks like this:
Total monthly debt payments ÷ monthly income = DTI
Here is a simple example that will explain how the math works.
Shawn and Linda have been married for 3 years and have saved for a down payment on a home. Shawn is an accountant earning a $60,000 per year salary and Linda is an elementary school teacher earning a $35,000 per year salary.
They have the following monthly debt payments: one car loan of $376.25, two credit cards of $65 each, and student loan payments of $486 per month. Their total monthly debt payments are
$376.25 + $65 + $65 + $486 = $992.25
Their monthly income, before taxes are removed, is
$60,000 + $35,000 = $95,000 yearly
$95,000 ÷12 = $7,916.67 monthly
Their debt-to-income ratio, or DTI ratio, is
$992.25 ÷ $7,916.67 = 13%
Very simple math, and very easy to calculate.
The only thing missing is the proposed monthly house payment for their new home. According to their lender, the proposed payment on the home that they are considering is $1,285 per month. So, the new calculation would be
($992.25 + $1,285) ÷ $7,916.67 = 28.77%
Now that we have explained the math, let us look at some of the details of this calculation and how lenders view the ratios.
Two Ways to View DTI
Most mortgage lenders will review the DTI in two different ways. The first way is to consider the home-only ratio. This is also called the Front Ratio.
What this means is the lender will compare the proposed home mortgage to the overall income. In our example above, the front ratio would be calculated as $1,285 ÷ $7,916.67 = 16.23%
NOTE: The home mortgage payment will need to include a proposed amount for annual property taxes and the annual homeowner's insurance policy. Your lender should provide this to you when you request a mortgage estimate.
The other way to view the DTI is the calculation we did earlier, which adds all the debt, plus the proposed mortgage payment, and divides it by the monthly income. This is known as the back ratio.
As previously shown, for the example of this article, this married couple has a DTI of 28.77%
Each type of mortgage loan will have its own rules about the 2 different ratios.
A more thorough discussion below will provide expected DTI ratios for different mortgage loans.
Things NOT Included in DTI Calculations
Now that we have examined how to calculate the DTI ratios, let us look at items that are not covered by the calculations.
The following items generally are ignored when determining a DTI ratio for a mortgage loan
These items are supposed to be covered by the amount of money remaining from the DTI calculation. That is why the ratios are set up in such a way to ensure the borrower has adequate money left over after paying the mortgage and other debt.
Overlooked Items to Include in DTI Calculations
While it is easy to understand a debt payment like a loan owed on a car or a credit card, some other items are added to the DTI calculations that you may not be considering.
If you are or will be responsible for paying any of the following types of obligations, these items need to be disclosed to your lender to make the correct DTI calculations.
You may be asked by your lender to provide legal documents to verify the monthly amounts for the above items to get approved for the mortgage.
Different DTI for Different Mortgages
Each kind of mortgage will have slightly different guidelines for their qualifying DTI ratios. Here are some general rules about the major types of home loans.
Conventional mortgage from Fannie Mae or Freddie Mac – These loans will examine the
Front DTI and the Back DTI. The Front DTI should be around 28% and the back DTI should be under 43%
If the borrower has a large down payment or significant cash reserves, the back-end DTI may be slightly higher.
FHA Mortgage – For FHA, the front ratio needs to be no higher than 31% and the back ratio should not be higher than 43%
Like Fannie Mae and Freddie Mac above, it is possible to get approved with slightly higher ratios. But the borrower will need to have substantial factors on their side to get approved for the higher ratios.
VA Mortgage – For the VA loan, only one ratio, which is the back ratio, is considered. The back ratio should not be any higher than 41%.
It is worth noting that the VA mortgage guidelines are strict about their DTI ratios. However, the VA home loan also has the lowest percentage of foreclosed homes as well, so there may be a reason why they stick to these rules.
USDA mortgage – USDA will allow borrowers to have up to 29% on their front ratio and 41% on their back ratio.
One final note to keep in mind when you are talking to your lender; some mortgage companies will have their own mortgage overlooks to work with. Your lender can discuss these overlays with you, but it is important to note that each mortgage underwriter may have a handful of special rules to follow when applying for a loan.
Improving Your DTI Ratios
If you are looking over your finances and realize that you have a bit too much debt to qualify for a home, there are some things you can do to lower your debt-to-income ratios and put you in a better financial position.
The easiest solution is to pay off as much debt as you can. The tried-and-true method of starting with the smallest balance and paying it off, then moving to the next largest balance, will help you to pay down your bills and give you some satisfaction during the process.
Another option is to add to your income. This could be something drastic like looking for a better-paying position at a different company but doing the same work you are doing now. Or it could be as simple as working a few hours of overtime per week at your existing job.
You can also add to your monthly income by taking on a 2nd part-time job. Keep in mind, if you get a part-time job and wish to use that revenue in your DTI calculations, you will need to have the job for a couple of years before the lender will consider the income.
A third idea is to add another person to the loan. FHA, along with Fannie Mae and Freddie Mac, have non occupying co-borrower loan options that allow for a borrower to be on the loan if the borrower does not plan to live in the home. Your lender can provide you with the details for the various types of loans and the down payment requirements for each mortgage.
Keep in mind that cosigner debt counts against you for the debt-to-income ratio calculation.
Summing Up Debt-to-Income Ratios
The calculations for debt-to-income ratios are rather easy to understand. The most important thing is understanding that both the proposed mortgage payment and any existing debt payments will all play a major role in getting approved for a home loan. By either keeping these ratios low now or working to lower the ratios, you will set yourself up for a better chance at getting approved to purchase a home.
Additional Real Estate Resources:
For a first-time home buyer, the above information is critical in knowing how much home you can afford but there is more to it than just the ratios.
Article from Madison Mortgage Guys - www.madisonmortgageguys.com/debt-to-income-ratio/
Written by Luke Skar
Did you know?
1. The anme Sunriver was selected by developers John Gray and Donatld V. MCallum in 1968
2. Sunriver is located on the grounds of the former Camp Abbot, a World War II training facility designed to rain combat engineers in a simulated combat environment. The U.S. Army camp opened in 1942, but by June 1944, the camp was abondoned and most of the settlement was razed.
3. Sunriver was also the site of the pioneer Shonquest Ranch. Sunriver post office was established on Jyly 18, 1969, at the same time the public facilities were opened.
4. All of Oregon has NO sales tax.
5. Oreogn is one of the only two states where you can't pump your own gas (New Jersey being the other)
6. Permanent population of approximately 1,700 though during high peak season it may increase to upwards of 20,000
7. This region experiences warm (but not hot) and dry summers, with no average monthly temperatures above 71.6 degrees F. According to the Koppen Climate Classification system, Sunriver has a warm-summer Mediterranean climate, abbreviated "Csb" on climate maps.
8. Sunriver airport is a public use airport located one nautical mile (2 km) west of the central business district of Sunriver. It is privately owned by Sunriver Resort, L.P. This airport is included in the national Plan of integrated Airport Systems for 2011-2015, which categorized it as a genearal aviation facility.
9. We have an Observatory which is an astronomical observatory operated by the not-for-profit Sunriver Nature Center & Observatory in Sunriver, Oregon. The observatory has 11 telescopes. In July 2012, the observatory was renamed the Oregon Observatory at Sunriver.
10. Elevation is at 4,164 ft
11. Sunriver has over 35 miles of paved bike paths.
12. Average commute time in 32 minutes. The National Average is 25 minutes to Bend.
Sunriver is nestled on 3,300 acres next to the Deschutes River in Central Oregon's High Desert. It is a residential-resort community that featurs year round activities. Below you wfind general descriptions and links as applicable to activities within Sunriver or the surrounding area. A variety of equipment is available for rent from business in in The Village at Sunriver and just outside Sunriver to help you enjoy your favorite sport or activitiy.
Sunriver boasts 34 miles of paved pathways for bicycle and pedestrian use. For safety reasons, rollerblading, skates and skateboards are not allowed on pathways or roads. Please follow Sunriver's pathway rules and respect the delicate vegetation by staying on the pavement. Try the Sun Lava 6 mile paved route to reach Benham Falls and Lava Lands Visitors Center off East Cascade Road near Circle 7.
Floating or paddling the Deschutes River can be relaxing, scenic and great excercise. Boats, canoes, kayaks, paddle boards, tubes and rafts are available at area rental shops in the Village at Sunriver and just outside Sunriver. There is a public watercraft launch at Harper Bridge, located on the southwest side of Spring River Road and a tke out just before Benham Falls. Or launch further upstream at Big River Campground and take out at Harper Bridge. (the Harper Bridge launch is suitable for ahnd launching canoes, kayakes, tubes, and rafts only)
Village Bike and Ski rentals, 4 Seasons Recreational Outfitters, Sunriver Toy House
Sharc has a disc golf course available free to owners with a valid SROA Member Preference ID card, SROA Recreation Plus cardholders and is included with SHARC daily admission. Disc golf aloine is $5
Anglers can find all the fishing challenges they would like on nearby rivers and lakes. Fishing seasons are variable, so check local regulations. Guided trips can be arranged through local outfitters.
The Hook , Sunriver Fly Shop
Two 18 hole courses - Woodlands and Meadows are operate by Sunriver Resort. 541-593-1000
Sunriver Resort's stables offers scenic trail rides. the stables are located along River Road in Sunriver. 541-593-6995
The Sunriver Nature Center & Oregon Observatory is a nonprofit scientific and educational organization. It includes interpretive exhibits, educational programs, a botanical garden, nature trail, observagtory, live raptros and other critters. The observatory offers seasonal night sky and solar viewing.
Sunriver sites in the middle of the Newberry National Volcanic Monument, which includes Lava Lands Visitor Center on Lava Butte, Lava River Cave, Lava Cast Forest and the Newberry craters a Paulina and East Lakes.
Fort Rock Park is located between circles 4 and 11 on East Cascade Road and provides recreatinal facilities for softball, basketball, volleyball and horseshoes. There is also a playground, pickleball an dtennis coures. A pavillion is available for picnic/ barbecue events.
Paulina Park is located at SHARC. Featuyres picnic tables, grassy area, bocce ball court, rock climbing wall and restrooms. A picnic pavillion is available for rent. Reservations are required. 541-585-3144
Mary McCallum Park is located on the river adjacent to the Marina. This park is restricted to use by Sunriver property owners only. It offers picnic tables, barbecues and a small covered pavillion. For reservations, contact the SROA office Monthday through Friday at 541-593-2411
The Sunriver Owners Association owns/ operates the SHARC aquatics facility and North Pool. SHARC includes indoor/ outdoor pools, lazy river, water slides, events center, outdoor amphitheater, park and winter tubing hill. The North Pool is only available to owners and open through the summer months.
SROA owns and maintains 24 outdoor tennis and 6 picleball courts. Equipment rentals are avaiable at Tennis Hill at Fort Rock Park, Memorial Day through Labor Day.
The Village features shopping, dingin, seasonal ice skating, bumper cars, bounce house playgrounds, mini golf, events and more.
There is ice skating in the the Village, tubing at SHARC and miles of pathways for crosscountry skiing and snowshoeing.
Some of the finest downhill skiing around is available just 30 minutes away at Mt. Bachelor. Equipment rentals and Snow Park permits are available at various locations in the Village.
2. Sunriver is located on the grounds of the former Camp Abbot, a World War II training facility designed to train combat engineers in a simulated combat environment. The U.S. Army camp opened in 1942, but by June 1944, the camp was abandoned and most of the settlement was razed.
3. Sunriver was also the site of the pioneer Shonquest Ranch, Sunriver post office was established on July 18, 1969, at the same time the public facilities were opened.
4. Sunriver and all of Oregon has no sales tax.
5. Oreogn is one of the only two states where you can't pump your own gas (New Jersey being the other).
6. Permanent population of approximately 1,700 though during high peak season it may increase to upwaards of 20,000.
7. This region experiences warm (but not hot) and dry summers, with no average monthly temperatures abouve 80 degrees F. According to the Koppen Climate Classification system, Sunriver has a warm-summer Mediterranean climate, abbreviated "Csb" on climate maps.
8. Sunriver airport is a public use airport located one nautical mile (2 km) west of the central businesss district of Sunriver. It is a privately owned by Sunriver Resort, LP. this airport is included in the National Plan of Integrated Airport Systems for 2011-2015, which catergorized it as a general aviation facility.
9. Sunriver Observatory is an astronomical observatory operated by the not-for-profit Sunriver Nature Center &Observatory in Sunriver, Oregon. the observatory has 11 telescopes. In July 2012, the observatory was renamed the Oregon Observatory at Sunriver.
10. Sunriver's elevaton is at 4,164 ft (1,269.2m.)
11. Sunriver has over 35 miles of paved bike paths.
12. Average commute time is 32 minutes. the Ntional Average is 25 minutes in Bend.
Wed Mar 24 2021
This week the median list price for Sunriver, OR 97707 is $992,000 with the market action index hovering around 83. This is an increase over last month's market action index of 77. Inventory has held steady at or around 4.
This answers "How's the Market?" by comparing rate of sales versus inventory.
The market continues to get hotter. More sales demand and fewer homes listed have contributed to a relatively long run of increasing prices. Current supply and demand levels show no sign of prices changing from their current trend.
Price trends in this zip code continued their recent uptrend this week. While still below the market's high point, we've seen a nice run recently.
Each segment below represents approximately 25% of the market ordered by price.
Go directly to First American Market Report
If you are thinking of selling your Sunriver home now is the time. This is one of the strongest sellers real estate markets we have ever seen in Sunriver, there is huge financial gains to sellers cashing in on the rising equities in their homes. So why is today any different than other times of being told it was a great time to sell?
The speed of today's real estate market is causing buyers to write offers sight unseen, to offer thousands of dollars above list price, to waive contract contingencies like appraisals and inspections, and to woo the seller in creative and unique ways. That is why if you are thinking at all about selling, the tremendously low inventory of homes for sale right now, along with the huge buyer demand and cash buyers, is pushing up home prices to offer opportunities for home seller's.
A seller's market means that there are more buyers than there is inventory, pushing the price of real estate up.
The real estate market measures "inventory" in terms of time on the market by comparing the ratio of active listings to pending sales as of the end of the month. This ratio gives us a turnover calculation, showing how long it will take for the current inventory of homes to sell. A real estate market is deemed to be a sellers' market when there is less than 5 months of inventory.
We can't predict how long this market will continue, if you are thinking of selling your home, don't wait and miss out on the market opportunity to sell for top dollar.
Increased home buyer demand due to historically low interest rates, increased demand from buyers due to economical circumstances, and low invnetory of homes pushing sales prices higher and higher.
Wed Feb 24 2021
This week the median list price for Sunriver, OR 97707 is $1,175,000 with the market action index hovering around 77. This is an increase over last month's market action index of 75. Inventory has held steady at or around 6.
This answers "How's the Market?" by comparing rate of sales versus inventory.
In the last few weeks the market has achieved a relative stasis point in terms of sales to inventory. However, inventory is sufficiently low to keep us in the Seller's Market zone so watch changes in the MAI. If the market heats up, prices are likely to resume an upward climb.
If you would like to know about what the Sunriver real estate market is doing give me a call at 541-815-0906 or email at email@example.com
Search all homes for sale in Central Oregon at www.isellsunriver.com
Information provided by First American Title.
The purchase of a home may be the biggest investment you ever make - one that First American wants to help you protect. Whether you're just starting to look at listings or you've already signed a purchase agreement for your dream home, we can help walk you through the home purchase process - and then help you keep your home protected.
Your specific reasons for buying a home will always be unique, but common factors to consider before deciding to purchase a home include:
When you do find your perfect home, you may need to act quickly. That's why it's a good idea to make sure you have all your financial arrangements in order beforehand.
Before you start shopping, it's a good idea to:
Purchasing a home may be the largest financial expenditure you make in your lifetime. For this reason, you may want assistance in navigating the real estate market and home-buying process. Hiring a real estate agent or broker can be a big help. A real estate agent can help you by:
When you are ready to make an offer, you and your real estate agent will need to draw up a contract with the applicable information. Your real estate agent will then present this offer to the sellers (or sellers' real estate agent). The sellers may accept, decline or counter the offer.
Your offer might include:
After a deal is accepted, everything that has been contractually agreed upon gets set in motion. The time between the offer acceptance and the closing of the transaction is known as "escrow." Depending on your geographic area, this process may differ, but will likely include third-party handling of transaction documents and funds.
Depending on negotiations, you might have to deposit money into an escrow account. The homeowner may then begin construction on any improvements/renovations required by inspections or the purchase contract, and you'll need to get your financial paperwork in order (including preapprovals, letters of intent and offer contract). All parties involved in the transaction will determine a tentative closing date, when the transaction should be finalized and you are scheduled to receive the keys to your new home.
After all the paperwork is signed, it's almost time to move in. If you think that a final inspection is necessary, be sure to include this in the language of the final contract; technically, you are entitled to as many walkthroughs as you want to determine if the sellers completed all agreed-upon repairs
To get more information about the First American Title can help go to there website at Firstam.com
All information has been provided by First American Title.... read the full article here
After months of living through COVID-19, your to-do list may have gotten much shorter. But now that we're in the midst of winter and are continuing to stay at home, what are some good winter DIY home projects to tackle?
Let's start with some home improvement ideas for winter. If you read about fall DIY projects, you may have already tackled painting your kitchen cabinets and accent walls and changed your lighting fixtures. If so, congratulations on that achievement! Now, let's look at some other home improvement projects you can tackle.
After painting accent walls, you may have noticed you also need to add a new coat of paint to the molding around your floors, ceilings, windows and doors. All you will need to get starting is paing and some paint supplies.
It may be cold now and your are not opening your doors and windows but come spring you will want to and you won't want pesky bugs getting in your house through holes and tears in your screens. This is a great winter home improvement project because you can bring the screens into your garage or basemnet to repair them in the off season. If you want to replace the entire screen you will need screen spline and rolling tool. You can buy these individually or pick up a complete screen replacement kit. If you have a small hole that just needs patched, you could use screen tape or pre-cut patches. A great place to buy these items is at our local hardware store in Sunriver, Camp Abbot Trading Co.
After spending time in your garage, you may realize you don't have much space with tools and sports gear everywhere. You can solve this issue with a few a garage organization measures. Get you garden tools out of the way with a wall mounted rack. A bike storage rack will get your bikes off the floor since you probably won't be riding them this winter. Add some hooks to store other things on the wall. A sports rack can keep all your balls, bats, gloves and rackets in one easy to find place. Stackable storage containers are great for all the other miscellaneous items you keep in the garage.
You can choose a closet organization system or select the pieces you need on your own. You may want to include space-saving collapsible hangers that let you hang four or five items in the same space as one regular hanger. Or, you could use an adjustable hanging rod , which gives you a two-tier system, doubling the number of clothes you can hang in the same space. Hanging shelves with drawers give you a great deal of flexibility, while a hanging shoe organizer will free up a lot of space on your floor.
If you're ready for more organizing, move on to the kitchen to find ways to create more space and make it easier to find the things you need. Arrange your silverware and cutlery with an expandable drawer organizer that will work in most drawers, narrow or wide. If your cans are always in the far reaches of your pantry, make them easier to find with a stackable can rack organizer. Take advantage of more space in your corner cabinet with a lazy susan. Keep your flour, sugar and other food fresh in stackable airtight food containers. With a pot rack organizer, you'll always be able to find the pot and lid you need without digging through your cupboard, while an over the door rack can be used for both spices and cans to save space in your pantry.
Ready for a new look for your bathroom? This may be a great time to spruce this room up with a new shower curtain, mat, and towels. Dress up your countertop with a new soap dispenser kit. Top it off by replacing your sink faucet and tub and shower kit.
You may not want to spring for new doors throughout your house or new cabinets, but you can give both a fresh, new look by replacing the door handles and cabinet knobs.
Hopefully this give you few ideas to spruce up your home before spring comes.
Article from move.com and written By: Laurie Garrison
If you were looking at homes in late fall but halted your plans, you should know that you do not have to delay your home purchase. Though the process may look slightly different now, buying a home is still very much possible in today's market.
So, if you are still looking to buy that dream house or second home soon, don't be afraid to move forward with it, as long as it aligns with your personal goal plan.
Keep these five things in mind:
Do not let circumstances keep you from investing in your future. If you do decide to move forward with your home purchase I would love to help!
Green statements indicates that no lender has requested information and the property owner is responsible for paying the bill.
A yellow statement indicates one of the two things:
The property owner is receiving a Senior or Disabled Tax Deferral in which the Oregon Department of Revenue will pay all or part of the property tax.
Or our records indicate a lender has requested your information and will be making your payment.
Taxpayers are urged to check with their mortgage company if they believe their current arrangement is not reflected by the color of the tax statement. This has been an area of confusion in the past years.
Important dates to consider:
Roll type: The property "roll type" is printed at the top of the statement. You will see one of the following descriptions: "Real Property", "Manufactured Structure", "Utility", or "Personal Property".
Property Description: Identifies certain characteristics of your property (when applicable) by:
Current tax year detail:
Your tax statement shows the taxes collected for each of the districts in which your property is located. Each district collects a permanent tax rate for ongoing services, plus any additional taxes that may be approved by the voters. These taxes are shown on your statement as Local Option Levies (LOL) or Bond Levies.
An informational flyer is included with each tax statement to be used as a guide for a better understanding of the property tax statement, payment options, and other programs associated with the Oregon Property Tax System.
Appeals, delinquency, foreclosure you can learn more here
Still have questions? Check out Deschutes County's frequently asked questions page.
In this Beacon report you will see information about the housing market from 1997-2020. Median sales price trends in Bend and well as Sunriver and La Pine, Oregon.
the Central Oregon real estate market has experienced a significant decline in the level of inventory this last quarter. The median single family residence sale price in Bend declined for the second consecutive month as the number of sales was nearly unchanged from November and December. Inventory declined to .3 months supply.
Redmond single family residential real estate market median sales price was $375k in December and had an increase in the number of sales when compared to November. The inventory in Redmond remains less than half month suppply.
Sunriver's single family residential real estate market median sales price was $635k with an average of 4 days on the market. Current Sunriver inventory is .2 months.
La Pine's single family residential median sales price was $325k with 17 days on market and a current inventory of .3 months.
With interest still being at record lows buyers are stacked up waiting to purchase properties as soon as they come on the market. If you are looking to sell a property now is a great time.
If you have any questions about the Central Oregon real estate market give me a call! 541-815-0906
View the whole report here
This information is from our MLS system, it is deemed liable but not guaranteed and is subject to change.
5 Tips for First Time Homebuyers
You have decided now might be the right time to enter into the Bend real estate market. Sometimes for first time homebuyers the process of purchasing real estate can be intimidating and very overwhelming. Keith Petersen will be there to help step you through the process from start to finish, he will help you get in touch with a mortgage broker to get you pre-approved so you know what price range you can start shopping in for homes, he will help you navigate the location and neighborhood that would fit your lifestyle and needs best and of course negotiating the purchase and handling all the paperwork that goes along with the real estate transaction. Below are 5 tips and advise to help you prepare for home ownership.