What Is Your Debt To Income Ratio? How Do You Calculate It?🤯

well hey have you ever been to your
favorite bank or favorite financial institution and some stuffy guy in a
suit came back and told you that you couldn’t get your dream blank because
your debt to income ratio was too high and you were like what something about
mr. day believe me I’ve been there and that’s exactly what this video is about
it’s about what is debt to income ratio anyway and how in the world do you
calculate it but before I get into that if you’re new welcome my name is Timesha
and my goal is to help liberate you from the financial chains that have you bound
it’s to give you financial freedom so if you’re interested in that then make sure
that you subscribe to my channel and make sure that you join me on this
journey because I definitely want to help set you free
okay so debt to income ratio what is it anyway debt could to income ratio is a
percentage of how much money that you make that goes to your debts so what is
your debts well basically your debt is anything
that your credit report says is going to take you more than nine months to pay
off so anything like your mortgage car loans credit cards student loans child
support or alimony what is not a debt well basically
anything that’s not a debt is considered your living expenses so anything that
you can’t pay off so like your gas for your car or your cellphone bill or
utilities or your cable bill all of those are considered living expenses you
can’t pay them off you’re going to continue paying them forever so those
are living expenses where debts will eventually get paid off so that’s why
they’re called debts oh I get it it’s very clever all right so what income do
the banks generally use to come up with your debt to income ratio well they look
at your adjusted gross income and basically
they ask you for when you come into the bank is two to three years of your tax
returns and so they get all of your tax returns or at least two to three years
of it and they find the average so if they ask you for two of them then
they’re going to add your adjusted gross income for you and if you have a spouse
your spouse add them together and then come up with your average by dividing it
by two and if they ask for three years then they divide by three I’m sure you
get it okay and so how basically do they calculate
this debt to income ratio now here’s the disclaimer there are many many different
ways to do this there’s of course the total debt servicing loan as opposed to
the gross debt servicing loan and it’s a whole lot of mumbo-jumbo and jargon that
is not needed for the layperson what you need to know is simply the number forty
three forty three percent yes there are other people that will say it’s 45
percent but that’s because the banks are more liberal all right 43 percent is
generally the statistical cutoff that says that if the debt is more than 43
percent of your monthly income then you won’t pay it
not you of course but statistically most of the people will not pay any of their
debts if it ends up being more than 43 percent and because loan officers are
generally in the business of wanting to pay be paid back or investment bankers
or whatever you want to call them they want their money back
all right so in order for them to get their money back they want to make sure
that they mitigate the cost loss as cheap as possible so they want to make
sure that they’re gonna ensure that they get their money back
will they always know but that’s just the name of the game so 43 percent that
is the number so let’s say that I make $10,000 lucky me right and I make that a
month well actually I make more than that a
month say I make 12,000 a month okay and with
write-offs and everything with taxes then I basically bring home net $10,000
a month all right so then I just take that lovely $10,000 multiply it by point
four three or forty three percent and that means that my debt to income ratio
is $4,300 a month that’s a scary figure but that’s how much I can spend or at
least that’s how much the bank says that I can spend so what happens if I want a
new debts okay let’s say I want to buy a nice new house somewhere like in Maui yes right and so what I do to find out
what my monthly debt that I can use is I take my debt to income ratio which I
said was 4300 from the last example and then let’s say I am spending two
thousand dollars in debt currently so then I just subtracted the two forty
three hundred minus two thousand means that I can spend twenty three hundred
dollars monthly extra in debts okay so as long as I have a monthly payment for
a new house in Maui under twenty three hundred dollars which probably would
give me a shoebox then I am good as far as my debt to income ratio and it will
not stretch my above my budget theoretically all right so hopefully
this video was of value to you I truly hope that it was if you want more
information on financial freedom that I realize you will love this video that’s
floating above me so until next make sure the two three

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