It’s frustrating to be denied a personal loan due to your debt-to-income ratio. Most traditional lenders prefer a debt-to-income ratio of 35% or less, but rising interest rates are causing borrowers debts to increase.
With most borrowers’ DTI increasing , traditional lenders have also increased their denials of loans. This is not the end; there are loan options that will come to your rescue after a debt-to-income turndown. Follow closely as we explore those options!
What is a Debt-to-Income Ratio
A debt-to-income ratio (DTI) is the relationship between your income and the money you owe. It is the sum of all your monthly debt divided by your gross income. The amount you get, multiply by 100 to get the percentage.
A high DTI signifies that a significant percentage of your monthly income goes into debt payment, and most traditional lenders will deny you loans due to a high DTI.
Reasons for Debt-to-Income Loan Turndowns
Interest rates keep rising, which means you pay more for mortgages or student loans. It may seem like a slight percentage increase, but it affects your monthly and principal payments. This means you have more debt and a high DTI, and traditional lenders can deny your loan.
Options if You No Longer Qualify for Traditional Financing
If you no longer qualify for traditional financing, there are several options to turn to. However, hard money loans are the best option as you can get your loan processed in a few weeks, and the repayment terms are flexible.
Benefits of Hard Money Loans Compared to Traditional Financing
Nearly the Same Interest Rates
Hard money loans do not have excessive interest rates compared to other financing options. Their rates are almost the same as traditional financing.
No Credit Score
Unlike traditional financing, hard money lenders do not check your credit score and will give you loans according to the property’s value.
If you have just entered the U.S, you understand it’s not easy to have all the documentation needed by traditional lenders for loan approval. However, with hard money loan lenders, you only need a little documentation, and your loan is approved.
Traditional financing may take months before they close up, and you may lose out on the property buying. With hard money loans, your loan will take just a few weeks to close hence enough time to complete your purchase.
You should not be worried if you have received a turndown for your DTI loan, as hard money loans are at your rescue. Contact us today, and we will help you apply for hard money loans, which will be processed in a few weeks.