Debt-to-Income Ratio Has you Stalled? We Can Help!

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Why DTI Ratio matters and how Lasaii Benefits can help…

Simply put, your debt-to-income ratio compares how much you owe each month to the amount you earn each month and has an important role with lenders when determining if you can qualify for a loan to purchase real estate.

Emily Starbuck Gerson from Credit Karma explores debt-to-income ratio and how important it is when qualifying for a loan in a recent article entitled, "What is Debt-to-Income Ratio and Why Does it Matter?"

Gerson explains, "Your debt-to-income, or DTI, ratio helps lenders determine whether you can truly afford to buy a home, and if you're in a good financial position to take on a mortgage." Sounds pretty straight forward right?  And to a certain point it is, but it gets a little trickier as you look closer.  This is because there are two types of DTI: front-end and back-end ratios.

Your front-end DTI is how much of your pretax income would be used for the mortgage payment and would include in the calculations how much would go towards housing expenses, such as property taxes and homeowners insurance. 

Your back-end ratio is calculated by dividing your total monthly debt payments by your gross monthly income.  "Your gross income is all of the money you've earned before taxes, including paychecks and any investments, or other deductions such as health insurance or retirement plan contributions, " Gerson provides. The back-end ratio would also include: your proposed monthly mortgage payment, credit card debt, student loans, car loans, etc.

So what does this all mean?  Basically, the lower your DTI ratio, the more appealing you are to a lender.  

The article quotes Wells Fargo in that, "... a person with a DTI ratio of 35% or less is ideal. It shows that your debt is at a manageable level and that you have plenty of money left over once your bills are paid.  A DTI ratio in the 36% to 49% range isn't optimal and ideally should be lowered so you're better able to handle any unexpected expenses." And a DTI of 50% and above?  Probably not going to happen.  

The bottom line? "There are two key ways to lower your DTI ratio: reducing your debt and increasing your income." Gerson states.

The article ends with some ideas as to how to accomplish this such as: asking for a raise, making extra payments on your credit card, reducing your day-to-day expenses, etc.


At Lasaii Benefits, we have a different approach.

Our unique strategy structures your SAFE HARBOR®-Directed IRA™ (SHIRA™) to increase your monthly income.

And-we know that it works.  With hundreds of clients in 36 states, we've structured and used this strategy countless times for our clients, creating extra income for them and getting their loans approved by loan underwriters nationwide.


Case Study: (Based on actual client of Lasaii Benefits).

Jen* was 54 years old and ready for a new chapter.  She had been working for a medical company in Laguna Niguel, CA and was ready to move on and open her own business.  She had her eye on a primary residence in a town in Oregon, but because she was in between jobs, so to speak, she couldn't show the necessary income to qualify for the $540,000 loan it would take to purchase the real estate.  Even with $548,000 in a 401K Rollover IRA from her past employer as well as other assets (owning a home in CA), Jen was still denied the loan because the loan underwriter would not treat her assets or equity as income.  She was referred to our company by a friend.  

We opened her a SAFE-HARBOR®-Directed IRA™.  We then structured the SHIRA™ in a complex way to satisfy to the loan underwriter the guaranteed income amount needed each month for a minimum of three or more years to qualify her for the loan.  Jen also qualified for the tax write-offs associated with paying interest on the loan and property taxes up to allowable by law.  She now happily lives in her beautiful, new primary residence in Oregon.

*Must have average and above credit score to use our program when qualifying for DTI ratio.

*Age is not a factor for our program when qualifying for DTI ratio.

*The name of our client was changed to protect her privacy.


BUT what is a SAFE HARBOR®-Directed IRA™?

Our SHIRA™ invests your funds in a protected account safe from any downturn in the stock market and upside potential when the market does well.  Depending on your age, the SHIRA™ lets you control an increase, decrease and stopping of your monthly withdrawals depending on your needs or to let the funds grow and accumulate for retirement income.  

Above all, the SHIRA™ allows for immediate occupancy for you and your family and no prohibited transactions with the flexibility of renting the real estate out to create extra income if you wish.  

Other benefits include but are not limited to: Step up in Basis for your heirs and tax savings for real estate ownership (if you qualify).

As always, with the potential interest earnings of the SHIRA™, possible appreciation of the real estate, rental income (if you wish), and the intrinsic value of occupancy, together with the tax write-offs, if you qualify, the total value and benefit of both the SHIRA™ and the real estate could be, and has been, in the double digits. In other words, the perfect alternative investment.

Please visit our website to learn more about our program, to see if you qualify for our program, to learn about the other innovative services we offer, or to sign up for our weekly newsletter.

Source:

Gerson, Starbuck Emily. “What is debt-to-income ratio and why does it matter?.” Credit Karma. 16 Jan 2019

<https://www.creditkarma.com/home-loans/i/debt-to-income-ratio/>