There can be a lot of confusing terms to know when getting a housing loan and debt-to-income ratio is one of them.
What is Debt-to-Income Ratio?
Debt-to-income ratio is the percentage of a borrower's monthly salary that a bank is comfortable with a person using for debt purposes. Typically, banks will have debt-to-income ratio about 30 to 40 percent of a borrower's monthly salary.
So let's say the borrower's income is P50,000 per month. Most banks would want their monthly debt obligation not to exceed P15,000 to P20,000. This will depend on the bank as mentioned earlier, some banks follow a debt-to-income ratio of 30% and some have 40%.
Why is This Important for Any Potential Home Loan Borrower?
It's really important because it can be the difference between a home loan application being declined by one bank while the other gets approved.
How Can a Potential Home Loan Borrower Know a Banks Debt-to-Income Ratio Before Applying?
Actually, banks don't tell necessarily outline every single part of the decision-making process of the home loan application and for good reason. Home loans can be quite complicated and the debt-to-income ratio is one part of the process. So it's not something that the bank can advertise.
The only way to know if you meet the debt-to-income ratio is to go through the whole home loan process and wait for the bank to let you know. A borrower would have to go through the whole process of this by themselves or they can call us.
In Nook, we can work things out with their debt-to-income ratio in a span of a minute. We can tell you which banks you match the criteria to and we can get the home loan approved for you without leaving your home.