A high debt-to-income ratio (DTI) can make it difficult to qualify for a mortgage. A DTI is calculated by dividing your total monthly debt payments by your gross monthly income. Government backed lenders like Fannie Mae, Freddie Mac, or even VA lenders, typically like to see a DTI of 36% or less.
If your DTI is above 36%, there are a few things you can do to improve your chances of getting a mortgage:
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Pay down debt: The most obvious way to lower your DTI is to pay off some of your debts through the cash out refinance. Focus on paying off high-interest debts first, such as credit card balances and personal loans.
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Increase your income: If possible, try to increase your income. This can be done by getting a raise at work, taking on a second job, or starting a side business.
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Lower your housing expenses: If your DTI is high because of high housing expenses, consider looking for a less expensive home. This will lower your mortgage payment and lower your DTI.
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Get a cosigner: If you have a family member or friend with a good credit history and income, they may be willing to cosign on the mortgage. This can help you qualify for a loan.
Lastly, you can explore getting a cash out debt consolidation loan through a portfolio mortgage lender. This doesn't mean a "hard money loan", it means the lender offers NonQM loans that have more relaxed guidelines
It is important to consult a mortgage expert, who will help you understand the best NonQM loan options available to you, and what steps you can take to improve your chances of getting approved. With the right guidance, it is possible to get a mortgage even with a high DTI, and begin the journey of homeownership.
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