Debt-to-Income Ratio for Kentucky Mortgage Loans:

 Debt-to-Income Ratio for Kentucky Mortgage Loans

Debt-to-Income Ratio: What It Is and Why You Should Care for A Kentucky Mortgage Loan

 Debt-to-Income Ratio: What It Is and Why You Should Care for a Kentucky Mortgage Loan Approval

Think back to the last time you financed a purchase — be it a home, automobile, or what have you… You may remember having heard the term “debt-to-income ratio.” Today I want to spend some time going over exactly what this ratio is, and to also touch on how it can effect your personal finances.

What is your debt-to-income ratio?

Commonly referred to as your “DTI,” your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income.
As an example… Let’s say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%.
This version of your DTI is sometimes referred to as your “back-end” DTI. This is often broken down further to give a front-end debt-to-income ratio, which is a component of your back-end DTI.

How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval

Your front-end DTI is calculated by dividing your monthly housing costs by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.
From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above).

How lenders use your DTI for a Kentucky Mortgage Loan Approval

Kentucky Mortgage lenders typically use DTI (along with other variables) to determine whether or not you qualify for a loan, and to help determine your Kentucky mortgage rate. A high front-end DTI raises red flags with lenders because it is commonly associated with borrower default. In fact, reducing front-end DTI to reduce the risk of homeowner default was one of the main objectives of the loan modification programs introduced by the government in 2009.
There are specific limits for DTI that are used as cut-off points when evaluating borrowers. Current DTI limits for conventional conforming mortgage loans are typically 28% on the front end and 36% on the back end, though these limits are slightly higher for government subsidized Kentucky FHA loans.
While there are certainly other factors to consider when determining our eligibility for financing (e.g., credit score, etc.), your DTI is an important determinant that you should be aware of. By working to improve it, you can make yourself a better credit risk, and thus get more favorable treatment from lenders.
Two obvious ways to improve DTI are to increase your income and/or decrease your debt. Both are solid goals.

Debt-to-Income Ratio: What It Is and Why You Should Care for a Kentucky Mortgage Loan for Kentucky Mortgage Loan Approval

Call us today for a free pre-qualification for your next mortgage loan in Kentucky. We are available 7 days a week to take your call..502-905-3780 or email us at
Joel Lobb (NMLS#57916)
Senior  Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346

Text/call 502-905-3708
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

10 thoughts on “Debt-to-Income Ratio for Kentucky Mortgage Loans:

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  6. What is Title Insurance?
    A title policy is an insurance policy that protects the financial interest in a property. There are two types of title insurance policies. The lender’s title insurance policy and the owner’s title insurance policy.

    Typically, the lender will always purchase a lender’s title insurance policy to protect their investment. This insurance policy fee is part of the closing costs and is always reflected as a lender charge on the closing disclosure.

    The owner’s title policy is an optional insurance policy that is not required in order to purchase a home. However, any Real Estate Professional that you work with will always recommend the purchase of this policy, in order to prevent any financial losses to the new home owner from previous home ownership.

    Why is Owner’s Title Insurance important?
    Homeowner’s have many options to consider when determining the best possible protection to keep their homes safe and secure for their families. Many homeowners choose to install smoke alarms, deadbolt locks, and home security systems as important lines of defense to ensure their peace of mind. An Owner’s Policy of Title Insurance is
    an optional protection available to homeowners who choose to provide an added layer of security and protection. Your home may be new to you, but every property has a history. There may be hidden issues in the chain of title which could affect your ownership, such as:
    • Errors in Public Records • Unknown Liens • Illegal Deeds • Missing heirs • Forgeries • Undiscovered Encumbrances • Unknown Easements • Boundary/Survey Disputes • Undiscovered Will • False Impersonation of Previous Owner
    What does Title Insurance protect?
    An Owner’s Policy of Title Insurance protects your investment for as long as you or your heirs have an interest in the property. Additionally, the title insurance company will, at its own expense, defend the title and will pay losses within the coverage of the policy if they occur. Unlike other insurance models, where premiums are paid on an ongoing basis, title insurance is a one-time premium paid at the closing of your transaction.
    What is A Real Estate Title Search?
    In Real Estate, a title search is the process of verifying the home seller’s right to transfer property ownership to someone else. It verifies any claims, errors, assessments, debts, any type of liens, any title deficiencies, and any restrictions that may be outstanding on the property.

    Take a look at this excellent guide by McMichael & Gray, a reputable Attorney Law Firm in the Atlanta area.


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