There are plenty of factors that go into the approval of a home loan, including your debt-to-income ratio.

While your debt-to-income ratio doesn’t have a direct impact on your credit score, it’s an important part of your overall credit health. It’ll also play a key role in how well your application will fare when you’re trying to obtain a mortgage.

What Exactly is a ‘Debt-to-Income Ratio’?

Lenders are not in the business of handing out large chunks of money to people who may not be able to pay the loan back in full. They have a set of criteria that borrowers need to meet before any money is loaned out. By setting up these requirements, lenders are able to hedge against any potential risks they may face.

In addition to your credit score, financial history, and collateral, lenders will also have a look at your debt-to-income ratio. This little number is basically calculated by dividing your monthly income by all your monthly debt payments. That includes any auto or student loans, credit card loans, and any other types of debt you may have. You’ll need to provide proof of income, since it’s not reported on your credit report.

Your debt-to-income ratio gives lenders the ability to judge how much more debt you’d be comfortable handling, and how much of a risk you might be for the lender. For instance, if your gross monthly income is $4,000, and your monthly debt obligations total $1,500, then your debt-to-income ratio is 37.5% ($1,500 divided into $5,000).

What Should Your Debt-to-Income Ratio Be to Secure a Mortgage?

The lower the number, the better. Ideally, your front-end ratio shouldn’t be any more than 28%. This specific ratio is the percentage of your income that would be dedicated to paying all your home’s expenses, such as your mortgage payments, property taxes, homeowner’s insurance, and HOA fees.

The back-end ratio shows what percentage of your income would cover all of your expenses, including your housing expenses and all other debt obligations you have. Ideally, this number should be less than 36%. It’s the back-end ratio that lenders tend to place the most weight on. Studies have shown that borrowers who have a higher debt-to-income ratio are more likely have problems meeting their monthly mortgage payment demands.

Lenders might accept slightly higher ratios depending on your credit score, down payment, overall amount of savings, and the exact type of loan you’re applying for. But generally speaking, anything over the 36% mark will raise flags for your lender.

Not only does calculating your debt-to-income ratio protect your lender, it also protects you from getting yourself into a potentially challenging financial position. If the money you make just barely covers all your expenses, you’ll essentially be left with nothing at the end of each month. Rather than being “house poor,” you might want to wait until your debts have whittled down somewhat, your income increases, or you’ve found a more affordable property that more closely matches your financial capabilities.

Even if you are approved for a mortgage with a high debt-to-income ratio, you’ll likely be slapped with a higher interest rate. Much like borrowers with low credit scores are offered high rates if they’re approved for a home loan, borrowers with high debt-to-income ratios will often be offered the same.

For lenders, it’s all about making the most on a return on investment. The main reason why they charge borrowers with a high ratio a higher interest rate is to offset the potentially greater default rate.

The Bottom Line

Your debt-to-income ratio is a critical component to the mortgage application approval process. Lenders want to make sure you’re fully capable of covering all of your expenses after adding a mortgage to the pile. The lower that number is, the higher your odds of being approved for a mortgage with a decent interest rate.

How does one top Chicago’s 4^th of July festivities from last weekend? With this weekend’s festivals, of course! And there are many to choose from!!

Returning for its 10^th year, at a new location due to construction (go figure), the Roscoe Village Burger Fest sets-up for its burger extravaganza at 3000 N. Clybourn Avenue from Diversey to Wellington in the Roscoe Village neighborhood this Saturday and Sunday (11:00 a.m.-10:00 p.m.). In addition to the mouth-watering patties, there will be two stages of non-stop music, arts & crafts and a fun-filled Kids’ Zone which include activities for kids of all ages such as face painting, fish bowl collages, tote decorating, tattoos and more for the younger ones, and outdoor basketball hoops, rock climbing, miniature golf and more for the older ones! This is one of the “tastiest” parties around!!

Returning for its 12^th year, West Fest is being held at 2000 W. Chicago Avenue between Damen and Wood in the Ukrainian Village this Saturday and Sunday (12:00 p.m.-10:00 p.m.) featuring some of the most-critically-acclaimed live music on two stages with a third family-friendly stage added this year. This street fest also features food from local restaurants, eclectic vendor booths from the neighborhood’s most popular boutiques, and more, as well as Pet Fest (located in an area within West Fest featuring pet-related vendors, dog activities, bathing pools and more) and Kid Fest (located on Wolcott St. featuring pony rides, local theatrical performances, live family-friendly music and more)! There truly is something for everyone at West Fest!!

Square Roots 2016 returns this year to 4400 N. Lincoln Avenue between Montrose and Wilson in the Lincoln Square neighborhood this Saturday (12:00 p.m.-10:00 p.m.) and Sunday (12:00 p.m.-9:00 p.m.) with two outdoor stages and two indoor stages featuring more than 60 acts including music, jams, dance and family activities. Also, checkout this year’s great lineup of over 40 craft beers from the best Chicago and regional craft breweries and gourmet food options from amazing Lincoln Square and Ravenswood restaurants! So bring the whole family for a great weekend at this not so typical food and music festival!!

Returning for its 31^st year, the Irish American Heritage Festival will once again celebrate all things Irish at the Irish American Heritage Center (4626 N. Knox Ave.) in the Mayfair neighborhood this Saturday (12:00 p.m.-1:00 a.m.) and Sunday (11:00 a.m.-12:00 a.m.). This indoor and outdoor fest is packed with festival favorites such as Irish and American food and drink, Irish step dancing performances, cultural exhibits, kids’ activities and more, as well as fun contests such the Men in Kilts Contest, Irish Soda Bread Contest, Freckle Contest and others!  It’s one of Chicago’s Best festivals!!

The Millennium Art Festival returns this year to 100 E. Lake Street at Michigan Avenue and Lake Street in the Streeterville neighborhood this Saturday (10:00 a.m.-6:00 p.m.) and Sunday (10:00 a.m.-5:00 p.m.) showcasing more than 110 juried artists featuring artwork in every medium. Besides the works of art, you can also enjoy festival fare from neighborhood restaurants and live music! But best of all, you can contribute your creativity to the freestanding graffiti wall at this top-ranked art and design show!!

Finally, Taste of Chicago wraps-up this weekend (10:00 a.m.-9:00 p.m.) at Grant Park (337 E. Randolph St.) in The Loop featuring diverse flavors from all over Chicago, once again, with an endless variety of dining options which include pop-up restaurants and food trucks. This year’s musical guests include Billy Idol (Saturday) and The Isley Brothers featuring Ronald and Ernie Isley (Sunday). And, don’t forget to join Eli’s Cheesecake as they celebrate their 36^th birthday at the Taste on Saturday! As you may or may not know, the Taste of Chicago is the nation’s premier free outdoor food festival!!

This weekend’s Movies in the Parks are –

Saturday

“Daddy Day Care” – Avondale Park (3516 W. School St.) – Avondale
“Spaceballs” – Eckhart Park (1330 W. Chicago Ave.) – West Town
“The Color Purple” – Rosenblum Park (7547 S. Euclid Ave.) – South Shore

Sunday

“E.T. The Extra Terrestrial” – Midway Plaissance Park (1130 Midway Plaissance North) – Hyde Park

If This Line-Up Doesn’t Top Last Weekend, What Will?

SUE MOSS & DEAN’S TEAM CHICAGO

If your home has been sitting on the market for a while with no bites, you might want to figure out what the problem is. The longer your home is listed without any offers, the more frustrating and costly it’ll be.

There are plenty of factors that can stand in the way of a property getting sold in a timely manner, including the following.

1. The Listing Price is Way Too High

If your home’s got the goods and it’s located in a desirable area, you can probably command a decent price, especially if you’re in the middle of a seller’s market. But that doesn’t mean you can arbitrarily pick any number you want. Sure, you’d like to get the highest possible dollar amount, but the listing price has to coincide with the current market value of your home.

Coming up with an ideal listing price is one of the most important factors in selling a house. Buyers are not going to give you what you’re asking for if they can get something similar for a lot less. If you price your house too high, you’ll miss out on attracting prospective buyers. Make sure you and your real estate agent accurately determine the value of your home in your market and get the price right the first time around so you don’t end up having to drop the price in the near future.

2. The Photos Are of Poor Quality

Buyers are likely to hit the internet when looking for a new home when they start the house-hunting process. In fact, 90% of buyers begin their home search on the internet before deciding whether or not they want to see a particular home.

When searching online, buyers expect to see professional photos of homes. If the images you’ve got published on the internet are dim, blurry, or look like they’ve been taken with your smartphone, buyers won’t be impressed.

Make sure you get your home professionally staged so it’s ready to be photographed. Hire a professional photographer to take plenty of high-quality pictures of your property inside and out. Listings that feature professional images generate 118% more online views compared to listings without them.

https://www.imotophoto.com/blog/entry/should-realtors-use-professional-real-estate-photography.html

3. The Curb Appeal is Lacking

Before buyers even step foot in your home, they’ll be greeted with the exterior of your property first. If they pull up to your house and are met with overgrown grass, unkempt bushes, a worn-out front door, or peeling paint on the siding, they’ll probably want to cut the visit short. Curb appeal says a lot about a home. If it’s in serious need of TLC, you’ll be missing out on a lot of offers.

Properly staged homes sell 73% faster than homes that have been left as is. If you want to speed the process along, make sure you set the stage for buyers.

https://themortgagereports.com/18516/home-staging-mortgage-sale-craig-berry

4. There’s an Issue With the Title

If there’s a problem with the title of your property, you’ll have a tough time selling. Buyers will typically look into the title of a property before they buy, and if they find any issues, they could walk away from the deal.

There are many issues that can tarnish a home’s title. Liens are among the more common, and are placed on the title of home if the owners owe a creditor money.

But there could also be a problem with ownership. For instance, if you owned the home with an ex-spouse who’s also on title, and didn’t get permission to list and sell the property, free and clear title can’t really be transferred until all owners’ signatures are on the contract.

Do yourself a favor before you list your property, and make sure the title is squeaky clean first so you don’t run into issues later. 

5. Your Finishes Are Dated

Beige kitchen appliances, rusty brass light fixtures, old-fashioned wood cabinets, and pink toilets haven’t been in style in decades. If your home is still featuring these finishes, you’ll have a tougher time selling.

Most buyers want a home they can buy without having to lift a finger to update. If your finishes look like they stepped right out of the 70s and 80s, it’s time to make some changes before you list.

6. There’s a Funky Odor Lurking

Your place could look great, but if it smells bad, buyers will certainly be turned off. Unless it smells like fresh flowers or warm apple pie, your home shouldn’t smell like anything. Buyers shouldn’t be able to pinpoint exactly what you had for dinner last night.

Any odors from food, cigarette smoke, pets, or anything else that could turn someone’s stomach should be eliminated before you let any buyer step foot in your home. 

7. Your Closing Date is Too Far Out

Most buyers expect to want to close a deal within 30 to 90 days after agreeing to purchase. Any more than that will likely send buyers looking elsewhere.

The majority of active buyers who are currently looking for a home and put in an offer today would be less likely to entertain a closing date 6 months out. If you’re not ready to close within 90 days, you’re better off waiting until you’re ready to sell in a time frame that most buyers expect.

The Bottom Line

Sitting on the sidelines waiting for offers to come in can be agonizing if there doesn’t seem to be any interest. Find out the average number of days similar homes in the area have taken to sell: if your property has been on the market for much longer, it’s time to take a closer look at your listing.

Every once in a while it’s worth seeing what’s new and toying around with it. This month, I found a couple new Android Apps that worth testing.

Let’s check out Boomerang Notifications. It’s a simple app that allows you to store your notifications so that you can address them at a specific day/time, or simply later.  This app is not new to the game of notification delays, but it is one of the few that is completely free.  It currently has a 3.7 rating in the Google Play Store.

This fun app is called Dango. Ever been on the search for a great gif, sticker or emoji or even other forms of media? Dango sources their media through Giphy and is quite fun to use. It works with most popular applications like Snapchat and Facebook Messenger. It runs alongside your apps and uses artificial intelligence to interpret your words suggesting the right emoticon. This free app has a 4.3 rating in the Google Play Store.

Make sure you have enough space on your phone since both of these apps will run concurrently with others you have open.

CATHY MALLERS & DEAN’S TEAM CHICAGO