Troy: welcome back to on the beat everyone.
I'm over here with jeff farnham from jts & company professional mortgage brokers.
We want to talk a little bit about roadblocks.
What are the roadblocks that you need to overcome when being approved for a mortgage?
And we're talking a little bit about dti, debt to income ratio.
What is that?
Jeff farnham: so, when qualifying somebody for a mortgage, there's two ratios we look at, debt-to- income ratio and the housing ratio.
Housing ratio is simply, what is the total house payment going to be, the principal and interest to repay the loan plus your taxes and insurance, divided by someone's gross monthly income.
And we really want to keep that payment around 29 to 30, 33% of somebody's total income.
Troy: of the gross income?
Jeff farnham: of the gross income, correct.
Troy: now when you factor those in, is that if you're a single person or is it husband and wife, a couple?
Do you take both or is it just the single?
Jeff farnham: so, it depends on how many borrowers we have on the loan.
If a husband and wife are both borrowing on the loan, we'll use both incomes, both gross incomes to qualify.
Troy: is that the normal practice for a married couple?
Sometimes it's maybe just the wife or just the husband?
Jeff farnham: sometimes, depending on what the situation is.
One person's credit may be stronger than the other and we don't have to have both on the application to qualify.
So, it really depends on each person's specific situation.
Jeff farnham: the other ratio we look at is that total debt ratio, and that's a combination of the monthly reoccurring debt, things like car notes, student loans, installment loans, credit card, minimum payments, those kind of things.
We do not include things like utility bills and insurance costs in that calculation.
And take that, plus the new house payment, divide that out by the gross monthly income.
Troy: what happens if i have too much dti?
How do i bring it down?
Jeff farnham: well, there's really only two ways to do that.
One is to increase income.
Two is to lower debt.
So, depending on where your debt ratio is, one thing we really do, if somebody comes in and their debt ratio is out of line, we don't just say, "hey, sorry, w can't help you."
We'll sit dow and work with you, maybe put a plan together where in three months, six months, a year down the line, you can be ready.
Troy: and that's super important, i would think jeff, that you're working with someone who you know is going to be a great client down the road as well and you're helping them feel financial success.
Jeff farnham: absolutely.
It's so important because everybody's situation today may not be right right now, but if we can help them get there at some point in the future, and sometimes it could be as quick as 30 days depending on what the situation is.
But i've had clients that we've worked with for over a year to get them ready to become a homeowner and they sustain themselves very well.
Troy: so, jeff, i've been approved for a mortgage, but somehow my dti changes.
What do i do, and what does that mean?
Jeff farnham: so, and that's very, very important.
Very good question.
And it's sometomething we teach our clients is to be careful of after they've done the application, is don't do anything that's going to affect your debt ratio.
Don't go out and open up a new account.
Don't go and have a lot of people check your credit, because we're going to pull your credit one more time before we close out that transaction.
Jeff farnham: so, if you've gone out, and people get real excited, they've bought the home and they want to furnish it with new things.
So they go down to the furniture store and they open a new account thinking that it's not going to impact them.
But sometimes another $50, another $100, $150 a month payment, can mean the difference between approving a loan and not approving a loan troy: so, i'm going to just make it clearer for me and everyone at home, when you pull that final credit check, what is the purpose of that, if we've already been approved?
Jeff farnham: to make sure somebody hasn't taken out an additional debt or something that we didn't know about.
So we do what's called a softball right before closing, just to double-check things.
Troy: i understand.
Well, what's the process after that second credit check?
Is it closing?
Jeff farnham: yeah, it's closing, because at that point we've approved the loan, it's in our loan is approved subject to, that final check.
And then once that's done, we're going to clear the file for closing and you're going to be on your way.
Troy: well, we put some questions out to our viewers to ask you, and one of them came back and said, "how can someone g about putting in a prequel application with jts & co?"
Jeff farnham: very easy.
One of the things we pride ourselves on in making the process very efficient is, because one of the biggest things we see is the fears, the first hurdle to overcome.
People are afraid to do anything.
So we have really some easy process to do that.
We have a text application where they can do it right there on their phone 24 hours a day.
Jeff farnham: of course they can go to our website and do it, and they're always welcome to come into our office and sit down and talk with one of us one-on-one and do an application right there.
Troy: perfect, thanks jeff, we appreciate you.
Troy: if you want to find out more information, there it all is, up on the screen, everyone, jts & company mortgage professionals.
Go over and see jeff and the team, they're so friendly and so warm as we've said before.
Troy: back after this short break everyone, you're