One of the first things to look at prior to shopping around for a good mortgage rate is your debt to income ratio. The first thing a lender is going to look at is your ability to handle the potential debt of a home loan, followed by your credit score. If your debt is too high and you income too low you will not be approved for the loan.
It is a simple matter of how much you make compared to the amount you pay towards bills every month. When you approach a mortgage lender this will be the most important thing they look at.
Calculating the ratio: Divide your gross monthly or take home salary by the total amount of your bills, including: any and all credit cards, car payment, any form of insurance and other loans (such as student loans, lines of credit etc). Leave out utilities and miscellaneous expenses such as food and entertainment.
Note: When shopping for a mortgage is that your debt-to-income ratio should be no higher than 36%. Anything above this could mean you'll be denied credit or charged a higher interest rate on your loan.
It should be noted that it is advisable to ensure that your total house hold expenses do not exceed 28 percent of your total take home salary (though there are exceptions). Remember that the lower your debt the better debt to income ratio you will have, making your chances of receiving a better interest rate on your mortgage much higher.
Use the following calculate your debt-to-income ratio: *Minimum monthly credit card payments: + Monthly car loan payments: + Other monthly debt payments: + Expected mortgage payments: *Total = *Your debt-to-income ratio is: *Your total by your monthly gross income = - 31387
It is a simple matter of how much you make compared to the amount you pay towards bills every month. When you approach a mortgage lender this will be the most important thing they look at.
Calculating the ratio: Divide your gross monthly or take home salary by the total amount of your bills, including: any and all credit cards, car payment, any form of insurance and other loans (such as student loans, lines of credit etc). Leave out utilities and miscellaneous expenses such as food and entertainment.
Note: When shopping for a mortgage is that your debt-to-income ratio should be no higher than 36%. Anything above this could mean you'll be denied credit or charged a higher interest rate on your loan.
It should be noted that it is advisable to ensure that your total house hold expenses do not exceed 28 percent of your total take home salary (though there are exceptions). Remember that the lower your debt the better debt to income ratio you will have, making your chances of receiving a better interest rate on your mortgage much higher.
Use the following calculate your debt-to-income ratio: *Minimum monthly credit card payments: + Monthly car loan payments: + Other monthly debt payments: + Expected mortgage payments: *Total = *Your debt-to-income ratio is: *Your total by your monthly gross income = - 31387
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