Calculating Debt to Income Ratio

Before you even start looking for a mortgage you should determine how much debt you can manage. As with any other loan , when you shop for a mortgage, one of the principal areas a mortgage lender takes into consideration before approving a mortgage is the debt to income ratio (which affects your credit score).

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.

Doing the math: It is a simple calculation, add up your monthly expenses (such as your car payments, minimum credit card payments, loan payments etc, note: you don’t include things like groceries or utilities). Add your expenses and payments (your mortgage payments plus, mortgage insurance, home insurance and property taxes) and divide the total by your gross monthly income.

If your ratio is falls under the 35% mark, then you’re doing great and shouldn’t have a hard time being approved for your mortgage. If however your debt ratio is above 35%, it may be become difficult to be approved for the loan and be prepared to pay a higher interest rate if you are approved.

If you can, it is preferable to keep your total housing expense under 28 percent of monthly gross income. Keep in mind, the lower your debt-to-income ratio the better, so pay down as much debt as you can before starting the mortgage process. Once you have a good idea of what you can afford and where you want to buy, check out current mortgage rates and contact Edmonton’s number one Realtor below.

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 =

Now that are ready to start looking at homes or Edmonton condoscontact Darlene Strang Edmonton’s condo expert and number one Realtor in North Alberta. Trust experience and your personal Realtor for life.

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