How to Refinance for a High Debt Ratio
Lenders measure debt-to-income ratio to make an accurate comparison between how much money you bring in each month and how much money you pay toward debts. When refinancing a loan, you may find that lenders are less eager to approve your request if you have a high amount of debt. There are solutions you can follow to get an attractive refinance offer.
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Instructions
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Find a lender that accepts a high debt-to-income ratio. Search a statewide bank directory. Visit your state's Department of Financial Institutions' website and view its online directory of state-chartered commercial banks. If your state does not offer such a directory, perform an Internet search or use a local business directory.
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Offset a high debt-to-income ratio with a high FICO score, if your score is high enough (i.e., 700 or above). If you do not know your FICO score, visit FICO's website or go to one of the three major consumer credit reporting bureaus -- TransUnion, Experian and Equifax -- and purchase your credit scores there.
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Increase income potential with available assets. Frequently, lenders view borrowers who have a range of available assets, such as stocks and bonds, more favorably than those who do not. Re-title assets, as needed, to back the loan.
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Attach financials. A lender may be more likely to approve a loan if you have a large amount of disposable income. Include paystubs, tax records and banking statements from the past two years.
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Apply with a co-borrower or co-applicant. Attach the co-borrower's credit file and gross income to lower your overall debt-to-income ratio.
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Consolidate credit and personal debts. If you are refinancing a mortgage, you may qualify to consolidate credit cards, personal loans and car loans into your new mortgage. Speak with your lender to learn if you qualify.
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Tips & Warnings
Your credit score and report may vary from bureau to bureau.
Purchase your credit score and report from all three bureaus.
You qualify to receive one free copy of your annual credit report. Visit Annual Credit Report's website to request, view and print your credit report for free.
You may need to pay down outstanding debts before applying.
References
Resources
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