Mortgage Numbers That Matter

CREDIT SCORE

Credit scores are used to help assess a person’s likelihood of repaying a loan. There are several different credit scoring models, such as FICO or Vantage 2.0. In general, credit scores are calculated by looking at a person’s payment history, the amount they have owed, the length of their credit history and the type of accounts that are open (i.e., credit cards, student loans and mortgages).

Having a higher credit score can help you secure a better loan and a lower interest rate. Did you know that once a year, you are entitled to a free credit report from all three major credit bureaus – Equifax, TransUnion^® and Experian. You can learn more about credit scores and tips on our Mortgage Do’s and Don’ts blog.

DEBT-TO-INCOME RATIO (DTI)

Another important aspect of applying for a mortgage is your debt-to-income ratio, often abbreviated as DTI. Your DTI is a helpful indicator on what you can afford when looking for a home.

Debt-to-income is calculated by taking the sum of your monthly debt payments and dividing it by your gross monthly income. This number will help lenders determine your capacity for monthly payments which will help determine the loan you qualify for. Keep in mind, your lender will calculate your gross monthly income based on the income documentation you provide. Depending on your type of employment, you will need to provide documents such as paystubs, W-2s, 1099’s and tax returns. If you are retired, your lender will require your monthly retirement benefit statement. Want to see how your current expenses affect your ratio? Check out our Debt to Income Calculator.