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Hi, my name is Ethan Ewing and I am the president of Bills.com, I want to talk to you today
about a very common mortgage term called debt to income, you will hear this all the time
when you talk to a mortgage lender, mortgage broker, your bank, whatever it is, about refinancing
your house or purchasing a new home. Debt to income simply is the amount of debt you
have, and this is monthly payments, so imagine you have $200 a month that you are making
in credit card payments, $300 dollars a month that you are paying on car payments and call
it $1,000 a month you are making on your current mortgage payment, that is $1,500 in debt,
those are your monthly payments. On the other side of that is your income, so you make $60,000
dollars a year, that is effectively $5,000 a month. You basically calculate that $1,500
into that $5,000, your debt to income is 30%. Your debt versus your income is 30%. It is
a very important term, underwriters when they are looking at new loans look at this very
closely, and it’s a big deal they have to make sure you’re going to be able to afford
your monthly payments moving forward. Hope that helps, we’ll see you next time.