Mortgage School: What is Debt-to-Income Ratio?

Mortgage School - What is Debt to Income Ratio Rose & Womble Realty Advance Financial Group monarch bank

When getting ready to apply for a mortgage loan you might not expect that your daily latte habit could be causing your interest rate to increase.  The reason is your daily spending could be causing you to carry a debt load higher than the bank is comfortable with when you go to apply for a mortgage.

We spoke with David Katz a Mortgage Loan Officer with Advance Financial Group a division of Monarch Bank about debt-to-income ratios and how they can help or prevent you from buying a house.

The debt-to-income ratio is a metric that lenders use to determine if you can handle the additional payment of the loan you’re trying to qualify for – and mortgage loan officers will look at this number very carefully.

According to Katz, the actual debt-to-income ratio is determined by the loan type. Conventional Loans will typically have a ratio of 36%-38%. Government backed loans, like FHA and VA could have a slightly higher debt-to-income ratio of 41%-43%.

To calculate the debt-to-income ratio you need to take your gross monthly income and multiply that by .36 (the minimum debt-to-income ration percentage). The number you get is the maximum amount you can spend each month on revolving and installment debt.

Debt to income calculation Rose & Womble Realty Company

There is a slight difference between revolving and installment debt. Revolving debt is credit cards, where the balances can fluctuate depending on your spending habits. Installment debt are purchases with a fixed repayment plan, including medical, student loans, and car notes. Both can influence the debt-to-income ratio in different ways. According to monthly payments that have less than 10 payments left are typically not considered in the debt-to-income ratio, but could be included if the payment is very high.

Other factors that could help with the debt-to-income ratio is having a strong savings history, and no payment shock. Katz says that finding a mortgage payment that is similar to what you’re already paying in rent or mortgage can be favorable for home buyers. Some times these factors can increase the tolerance of the debt-to-income ratio but this is on a case-by-case basis.

“Good credit is not a compensating factor, good credit is expected,” says Katz.

Home buyers do need to pay attention to balances for credit cards – having a $500 balance on a credit card with a $5000 limit is significantly different than having a $4800 balance on the same card. Yet the balance isn’t the only thing to look at.

And while it is necessary to have a credit history with showing on-time payments the term “good debt” is a myth. Katz says, “There is no such thing as ‘good’ debt. We look at the overall credit picture. It is nice to see a variety of debt, both revolving and installment debt. We are more concerned with the required minimum payment than we are with the balance.”

For more information you can contact David Katz at  757-572-7251. He is a mortgage loan officer with Advance Financial Group a division of Monarch Bank. NMLSR #653697

All rates and programs are subject to change and based on borrower eligibility.


Rose & Womble Listing Featured in the New York Times

Susan Constant featured in the New York Times What You Get column

We’re so excited to announce that one of our listings was featured in the New York Times’ column, ‘What You Get‘ written by Mike Powell.  Each week Powell chooses three homes throughout the United States in similar price ranges and compares features, sizes, and other details. This is the first time the Virginia Beach area has been featured in the column.

The home located in the Princess Anne Hills section of the city is listed at $1, 195,000 and is a transitional style home built in 1972. It has deep water access and has been completely renovated. It is listed by Rose & Womble Beach Office’s Gay Bulan. The home will be open this Saturday from 12-3.

Here are some great photos of the listing.

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Kings Fork Farm Hosts #AskJenLive

#AskJenLive was held at the beautiful community of Kings Fork Farm in Suffolk, built by Terry-Peterson Residential. Conveniently located near Route 58 and the new Obici Hospital, you’ll have easy access to anywhere in Hampton Roads but still enjoy country life.

King Fork Farm Living

Kings Fork Farm Community Rose & Womble Realty Company

Kings Fork Farm is a community where residents enjoy the sanctity of their neighborhood nestled away from the busy hustle and bustle of the city. All of the new homes feature modern conveniences that today’s home buyers are seeking. There is over 160 acres of open space, with walking trails, sidewalks, a neighborhood pool and clubhouse, and a playground. The community pavilion is very popular for community events and outdoor festivals.

Kings Fork Farm Pool Rose & Womble Realty

Spotlight Home: 5007 Kings Grant Circle

5007 Grant Circle, Kings Fork Farm, Rose & Womble Realty Terry Peterson Residential

With several floor plans and home styles to choose from, you’re certain to find the perfect home for you. Our spotlight home was 5007 Kings Grant Circle which is a four bedroom, three and half bath home with just over 2,250 square feet. This home has two master suites, which is becoming increasingly popular with families who want grandparents to move in. There are also garden tubs with separate showers in both master suites, gas fireplaces, and granite countertops in the kitchen. The screened-in porch is perfect for summer days and al fresco dining.

kings fork farm rose and womble bathroom

The best news is that this home is priced under $280,000 and will be available for you and your family to move into within the next 45 days.

About the Builder

Kings Fork Farm Suffolk Terry Peterson

Terry-Peterson Residential, the builder for this community, is well-known for excelling in customer service and they pride themselves on involving home buyers in every step in the process of building your dream new home. They have a 93% approval rating from their home buyers. They are currently building new homes in five different communities throughout the Hampton Roads region. Terry-Peterson Residential is offering $8,000 in closing cost assistance to buyers for Kings Fork Farm when you use one of their preferred lenders.

Suffolk, Virginia is a thriving city with lots of open space, where you can come home and be tucked away from the hectic city life, but you’re only a quick car ride away from activities and everyday conveniences. Downtown Suffolk offers quaint restaurants featuring local flavors and produce.


#AskJenLive Yoda from Norfolk SPAC Getting Nuggets from Chick-fil-a

And of course, Jen brought a furry friend for a field trip and Chick-fil-a! Yoda is a younger dog, with an older look. He is sweet, wise, and has great manners. He’s going to be great in a home with older children, and gets along with most other dogs. The Norfolk SPCA actually got Yoda from a shelter in Appalachia, so he’s a mountain boy at heart. As always our feature builder, Terry-Peterson Residential, will pay for the adoption fees if Yoda is adopted within the next two weeks.

Yoda from #AskJenLive dog

If you’re ready to take a VIP tour of Kings Fork Farm, or want to visit any of Rose & Womble’s New Home Communities, all you have to do is Ask Jen! You can call her at 757-774-6999 or visit You can catch #AskJenLive every Wednesday at 12:00pm on Twitter and Facebook.