I have a bunch of credit cards all maxed out and I have 2 car loans. I have never missed a payment. Now my debt to income ratio is almost 1 to 1. Is there anyway on God’s green earth I can go out and buy a house?
How much do you have for a down payment? The more you can put down, the more likely you are to find a lender willing to work with you.
Ouch no down payment. How much would I need?
Try this site. My husband and I just used it to find out how we would look to creditors when we apply for a home loan this spring. You do need to pay about $15 for the service, so don’t expect a freebie. We thought it was well worth it, though, to see where we stand with creditors.
IANA loan officer, but here is my experience- clean up some of that mess before you even start. Get the credit cards paid off and cancel them. Yes, cancel them. Having too much available credit can be almost as bad as too much debt. You can start them up again after you close your home loan.
It will help that you have no bad things like late pays on your credit report. Have you checked your credit reports to be sure that are none on them by mistake? It’s easy to do by phone, and make sure you get all three (Trans Union, Equifax and Experian), not just one or two, because they will have different info from different creditors, don’t ask me why. The reports will cost you about $8 each, unless you have been turned down for credit of any kind in the last 30 days, in which case they’re free.
Not having a down payment can make it very difficult to buy a house. Are you a veteran by any chance? Or do you have access to other gov’t loan programs? Check these out, you never know.
Good luck, and I mean that. The median price for a house in my area is astronomical (SoCal), so I know how much fun it can be.
When you say your debt to income ratio is 1 to 1, do you mean that every dollar you make goes to paying debt? How do you pay for food, rent, etc?
As described in more detail below, the important numbers are your monthly income and your monthly debt payments.
Mortgage lenders usually look at two ratios: First, the ratio of your mortgage payment alone to your monthly income. Second, the ratio of mortgage payment + other debt payments to monthly income. A typical, conservative loan will use 28/36 as your ratios. Under this scenario, your monthly mortgage payment + monthly debt payments can be no more than 36% of your monthly income.
If you have good credit, a lender may let you go up to 36/42 or even 50/50.
I would recommend talking to a good mortgage broker in your area. You’ll have to call a lot, since many of them aren’t smart/experienced enough to look at your financial situation and evaluate it and tell you what you need to do.
A good mortgage broker may be able to help with the down-payment problem too.
If you can reduce your monthly housing expense by buying, your ratio might go down as a result of the loan. Not very common, but if you have high-end rent and are willing to move to a cheaper location, it’s possible. Your ratios will also be calculated using the tax breaks you get from mortgage interest write-offs.
Just be sure you’re willing to be “house poor”. And ready for the moment when the water heater develops large leaks.
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*Originally posted by lucwarm *
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By income, do you mean net, or gross? That can make a big difference. 
I’m pretty ignorant about this house-buying stuff, too, but I’d like to figure it out in the next few years.
If your ratio is truly 1 to 1, then you should:
[ul][li]Find a cheap lawyer[/li][li]File bankruptcy[/li][li]Cut up your credit cards[/li][li]start living more within your means[/li]marry someone with good credit and who owns a house.[/ul]
There are percentages for both. The 28/36 ratio quoted by lucwarm would be of gross income. The percentages for net income would be slightly higher.
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Borrowing on a credit card is expensive. Pay them all off.
(I have never paid ANY interest on my card - I’d rather spend the money on something I want). -
Save up a deposit.
(It’s really nice when the bank pay YOU interest each year). -
Buy the house!
If you can’t save money, how are you going to cope with minor problems / damage to your property? (After you’ve bought it).