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Buying a House? How Much Home Can You Afford?
Maybe you've heard the expert advice that your debt to income ratio shouldn't be more than 36 percent of your total income. But do you truly know what that means, and how lenders will look at your financial history in order to decide whether or not to extend you a mortgage? If you need help figuring out your debt to income ratio, simply follow the guidelines below and soon you'll know whether or not you're in a position to apply for a mortgage loan.
Your debt to income ratio is the amount of monthly debt you pay out in contrast to how much income you have coming in. Start by figuring the easy part-your income. If you are on a structured paycheck, then it will be easy-simply calculate your monthly salary. If you work on a commission or other type of varying income, total your last six month's earnings and divide by six.
Now you will need to figure your monthly debt. You should total your car payment, credit card payments (use the minimum amount payments for this calculation, even if you pay more), any other monthly debt-such as child support payments-along with the estimated amount of your new mortgage payment.
Now, take the total of your debt payments and divide it by your income and you will have your debt to income ratio. Most lenders will want to see no higher than a 36 percent debt to income ratio, although there are a few exceptions.
If you find that your debt to income ratio is so high that you may not be able to quality for a mortgage, you should try to pay down some of it before applying for your loan. This will not only better your chances for a mortgage loan, but it will also ensure that you quality for one with better interest rates and terms.
To view our recommended sources for home mortgage loans, visit: Recommended Mortgage Lenders Online.
Carrie Reeder is the owner of ABC Loan Guide, an informational website with articles and the latest news about various types of loans.
MORE RESOURCES updated Sun. May / 28 / 2023
Today's Mortgage, Refinance Rates: May 26, 2023 | Tired of Rising Rates? Blame the Debt Ceiling Debacle - Business Insider
Today's Mortgage, Refinance Rates: May 26, 2023 | Tired of Rising Rates? Blame the Debt Ceiling Debacle Business Insider
The Great Pandemic Mortgage Refinance Boom - Liberty Street ... Liberty Street Economics -
Compare Today’s Refinance Rates | U.S. U.S News & World Report Money
What is mortgage refinancing and how does it work? Yahoo Finance
Today's Mortgage, Refinance Rates: May 21, 2023 | Rates are Flat for now, but Should Drop Later This Year - Business Insider
Today's Mortgage, Refinance Rates: May 21, 2023 | Rates are Flat for now, but Should Drop Later This Year Business Insider
How to get a low-cost mortgage refinance Yahoo Finance
Should you refinance your mortgage to pay off debt? New York Post
Banks to be stuck with 'mortgage prisoners' as those who can refinance their home loan search for a better interest rate - ABC News
Banks to be stuck with 'mortgage prisoners' as those who can refinance their home loan search for a better interest rate ABC News
What Credit Score Is Needed To Refinance a House | Chase Chase News & Stories
Total Household Debt Reaches $17.05 trillion in Q1 2023; Mortgage ... - Federal Reserve Bank of New York
Total Household Debt Reaches $17.05 trillion in Q1 2023; Mortgage ... Federal Reserve Bank of New York
Ask Chuck: How can I ever afford a home? The Christian Post
Refinancing your mortgage could save you thousands — here are some of the best refinance lenders - CNBC
Refinancing your mortgage could save you thousands — here are some of the best refinance lenders CNBC
How To Remove PMI: A Complete Guide Zing! Blog by Quicken Loans
Compare Current VA Loan Rates | U.S. U.S News & World Report Money
How does mortgage refinancing work? CBS News
Should I Refinance My Mortgage? - Buy Side from WSJ The Wall Street Journal
Here’s how sharply mortgage refinancing has dropped off Yahoo Finance
CFPB Launches Effort to Spur New Opportunities for Homeowners ... - Consumer Financial Protection Bureau
CFPB Launches Effort to Spur New Opportunities for Homeowners ... Consumer Financial Protection Bureau
Today’s 30-year mortgage refinance rates hit lowest levels in 15 days | Oct. 28, 2022 - Fox Business
Analysis | It Will Pay to Wait to Refinance Your UK Mortgage The Washington Post
Small Business Loan Refinance Bankrate.com
Why Older People Can’t Get New Mortgages The New York Times
Debt-Ceiling Deal Is Close. Recession And Stock-Market Drop May ... Investor's Business Daily
VA Refinance Rates - Current VA Loan Refinance Rates Today Business Insider
Current 15-Year Refinance Rates Today Business Insider
Refinance Closing: An Overview Zing! Blog by Quicken Loans
7 Refinancing Programs for Seniors Total Mortgage
Compare Current 30-Year Refinance Rates Business Insider
Heloc vs. Cash Out Refinance Credible