UNDERSTANDING the DEBT-to-INCOME Ratio
One of the most important aspects of qualifying for a mortgage is your debt-to-income ratio. You may have heard 30% or 43% thrown around with the words debt-to-income as a measure of how much you can afford to pay every month. The ratio works like this: you earn $6,000 a month before taxes and deductions, which means you have $1,800 a month available to you for your debt service. $600 of that available amount goes toward paying your outstanding debts and leaves you with $1,200 to go toward a mortgage according to the debt-to-income ratio guideline.
You can max out that $1,200 a month for a mortgage and stay within the 30% rule, or you can push further and go as high as 43% on the ratio. The higher the debt-to-income ratio you go, the more money you have available to buy a home and still obtain a qualified mortgage. Your ability to get a higher percentage depends on a few factors and you should always discuss the pros and cons of going higher with a mortgage specialist.
Source: Consumer Financial Protection Bureau
If you or anyone you know has questions about home loan rates or products, please reach out. I’m always happy to help. Enjoy this month’s issue of YOU Magazine.Article Courtesy of:
Greentree Mortgage Co LP
Phone: (609) 605-7153
CO NMLS ID # 16128
NMLS : ID #143589
Keller Williams Real Estate
Website: Your Next Philly Home.com
Office: (215) 464-8800
Mobile: (610) 608-2769