1. When Perceptions Matter These two people have a similar education and similar work experience. They are both applying for the same job in an office environment. Who do you believe will likely get the job?

2. When Perceptions Do NOT Matter Let’s take a different look… These two people are now applying for an automobile loan Annual Salary = $80,000 Credit Score: 630 Monthly Financial Obligations are 65% of his income Annual Salary = $60,000 Credit Score: 810 Monthly Financial Obligations are 25% of his income Who you think gets the loan?

3. Debt-to-Income Ratio Debt-to-income ratio is a simple ratio that shows what percent of your gross income goes toward paying for your recurring monthly bills. – Recurring monthly bills are usually: Mortgage/Rent Car Payments Minimum Payments on Credit Cards Student Loan Payments

4. Debt-to-Income Ratio Total Monthly Obligations are then Divided by Your Monthly Gross Income to get the DTI ratio. Two numbers for the ratio: – Front End: Only the monthly obligations toward housing are used. A good front-end ratio is 33% or less – Back End: All recurring monthly obligations are used. A good back-end ratio is 40% or less

5. Debt-to-Income Ratio For Example: – Steve has an annual Salary of $37,000 – He has student loans of $200 per month, a car payment of $350 per month and monthly minimum credit card bill of $75 per month. – He wants to rent an apartment for $850 per month. What will his front-end and back-end DTI ratios be? – Is it a good idea for him to rent this apartment?