Grand Rapids metro scores well in debt-to-income ratios

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The Grand Rapids/Kentwood metro area is in good shape when it comes to debt-to-income ratios for home purchase loans.

A new report from Construction Coverage looking at the locations that have the highest debt-to-income (DTI) ratios for home purchase loans ranked Grand Rapids/Kentwood as the 15th-best locale in the country for those types of loans.

Based on information gleaned from The Home Mortgage Disclosure Act, researchers calculated the share of home purchase loans with a DTI ratio of more than 36% and ranked the metros accordingly. The DTI ratio is calculated by an individual’s monthly debt payments divided by their monthly income. Only conventional home purchase loans originated in 2020 were considered.

In the Grand Rapids metro area, 40.3% of those loans had a DTI ratio of over 36%. For the sake of average comparison, home purchase loans nationally with greater than 36% DTI sat at 44%.

Lenders use the DTI ratio to determine whether borrowers will be able to make payments reliably. Nationally, more than 90% of loans are approved with applicant DTI ratios of 49% or less, according to the report, while just 33.5% of loans with DTI ratios of 50-59% are approved.

In Grand Rapids, the report stated just 13.7% of home purchase loans had a DTI ratio of more than 43%. Locally, lenders approved 87.6% of all home purchase loans. Those figures broke down to 80.5% approval for applicants with DTIs ranging from 36-43%, and 63.4% approval for DTIs over 43%.

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