Tools & Resources

Debt

Money owed to another and due to be paid according to a predetermined agreement. Mortgage lenders carefully review your debt to help determine their loan decision. Also referred to as liability.

Debt-to-Income Ratio

Your total monthly debt, divided by gross monthly income and shown as a percentage. Total monthly debt includes monthly mortgage payments as well as student loans, car loans, and credit card payments. Example of an ideal debt-to-income ratio: If debt = ($XXX) and gross monthly income = ($XXX), the Debt-to-Income Ratio equals ($XXX) divided by ($XXX), or (XX%). This indicates that you are well qualified to pay back the mortgage loan. Generally, lenders want a debt-to-income ratio of 36% or under, although some lenders will accept ratios up to 50% if you have a good credit rating. Also called the back-end ratio or total debt ratio.

Default

Failure to make payments as required by the terms of the mortgage loan. Default puts you at risk of losing the property.

Delinquency

When you don't submit payments before the due date and grace period have passed.

Depreciation

A decrease in the value of a property due to negative events such as unfavorable changes in market conditions, or damage to the property.