In order to calculate the debt to income ratio, the lender will take your gross monthly income and will divide that amount by your monthly debt. This calculation does not include utilities, insurance payments, grocery bills or child care expenses.
The debt to income calculation helps the lender determine if you qualify for the mortgage. If the debt to income ratio is too high for lending standards, then the loan will be denied.
I constantly remind my customers to consider their lifestyle in the mortgage budget. This is an extremely important piece to being a happy homeowner. If you do not like to live pay check to pay check, then you need to look at a home which is less than the amount in which you qualify.
Most lenders want to to see a debt to income ratio of less than 43%; however, the financial planning community will tell you to keep this number at 36% . If you stretch your total debt (including your payment) to over 40%, you WILL have to watch your budget very closely. If you can keep your total debt to income ration at 36% of your gross income (including house payment), then you should have enough money to set aside for saving and not feel such a strain on your budget.
The debt to income calculation helps the lender determine if you qualify for the mortgage. If the debt to income ratio is too high for lending standards, then the loan will be denied.
I constantly remind my customers to consider their lifestyle in the mortgage budget. This is an extremely important piece to being a happy homeowner. If you do not like to live pay check to pay check, then you need to look at a home which is less than the amount in which you qualify.
Most lenders want to to see a debt to income ratio of less than 43%; however, the financial planning community will tell you to keep this number at 36% . If you stretch your total debt (including your payment) to over 40%, you WILL have to watch your budget very closely. If you can keep your total debt to income ration at 36% of your gross income (including house payment), then you should have enough money to set aside for saving and not feel such a strain on your budget.