Everyone who applies for a mortgage must know that their creditworthiness has a great influence on the result of a loan decision. A negative response to an application is most often caused by a low level of DTI. Banking institutions pay special attention to DTI, which is why its knowledge is so important. Are you wondering how you can easily check your credit standing with the help of the DTI?
What is the DTI indicator?
At the outset, we’ll focus on the importance of defining the DTI. Well, this is an abbreviation of the English term “Debt to Income”, which in free translation means – debt to income and in relation to mortgage loans it is understood as the ratio of the sum of all liabilities to the current amount of net income.
So how do banks check the creditworthiness of a potential borrower? In this case, each of the banking institutions takes into account all current liabilities, which are added together with the loan installment requested by the Customer.
According to the recommendation of the Polish Financial Supervision Authority (Polish Financial Supervision Authority) for PLN loans, the DTI ratio with revenues below the national average should be 50% maximum, while with revenues exceeding the national average – 65%.
Considering the results of DTI, a bank that wants to grant us a mortgage benefit will charge us with an installment, the sum of which will not increase the safe ratio. The DTI is one of the elements that translates into the result of a loan decision obtained depending on our creditworthiness.
Creditworthiness and its impact on the loan decision?
As we mentioned at the very beginning, the main reason why banks refuse to grant us a mortgage is the lack of creditworthiness depending on factors such as the current financial and professional situation of the potential borrower and the amount and duration of the loan obligation we apply for.
What is credit standing? Well, this is a kind of assessment of the possibility of repayment of the installment received loan with interest due, within the prescribed period. The assessment of creditworthiness makes it easier for a banking institution to make a final loan decision, which can be positive or negative.
Do you want to know how to check your credit standing? The answer to this question is provided below, use our tips and check your credit standing yourself.
How to check your credit standing?
Contrary to appearances, calculating creditworthiness is not as complicated as it may seem. To better understand this process, you need to know what your creditworthiness depends on.
Undoubtedly, income is the basic factor influencing the creditworthiness of all borrowers. In this case, it is worth knowing that banking institutions are interested not only in the sum of revenues obtained and their source, but also in the period of their receipt and the regularity of inflows made to a personal bank account.
Another factor in the creditworthiness assessment method are current charges and other financial liabilities, i.e. net income. This is the sum of money that is at our disposal after deducting all expenses related to payment of monthly commitments.
The creditworthiness test also focuses on the costs of maintaining a home and family members under our care, e.g. a spouse and children. The information contained in the BIK (Credit Information Bureau) and other institutions with information on our credit history also have a huge impact on the result of a loan decision.
Are you trying to get a loan for a large sum of money? If so, be sure to calculate your creditworthiness, because only then you will find out if you can always pay new liabilities on time.
The calculation of creditworthiness should start with collecting information on the revenues obtained from all sources, then focus on current expenses. Creditworthiness can also be calculated by using a special calculator provided by banks.
DTI indicator – summary
The DTI indicator is one of the basic factors that allows us and, above all, the Banking Institution to check our creditworthiness. The best way to assess your real chances of getting a mortgage or cash loan is by yourself calculating your creditworthiness.
Remember before applying for a mortgage in the bank, which you will probably pay back over the next dozen or even several dozen years, be sure to calculate your creditworthiness. Thanks to this, you will find out if the additional installment will not negatively affect your liquidity, which is an effective way to avoid serious financial problems.