Mortgage Programs

Debt to Income Ratio

A common term you will hear during the initial mortgage application process. You can figure your debt to income ratio by dividing the total amount of your bills(only long term debt such as credit cards, car loans, etc.) including the new house payment and dividing by your total gross monthly income (before taxes). Just remember that because it looks good on paper doesn't mean it is an affordable payment. You have to be honest with yourself and set a realistic mortgage payment that you can truly afford.

The only thing you need to remember is that you cannot go above a 55% debt to income ratio. There are lenders that will go higher but you should not put too much trust in them. In addition, most lenders require you to have at least $1000 left to pay your bills after your mortgage payment.

Here is the math

So what does that mean?

This person could afford a $700 per month mortgage payment. However, many factors contribute to how much that $700 gets you.

Along with your mortgage payment you will have to pay real estate taxes and mortgage insurance. Click on the link below for information on mortgage insurance.

Mortgage Insurance