FirstBank FTHBPacket FinalNoBleeds - Page 5



HOW MUCH CAN
YOU AFFORD?
Affordability is critical when buying a house and calculating your debt-to-income ratio is one way to assess how
much you can realistically spend on a property. Typically, your mortgage payment should not exceed about a
third of your gross monthly income. But just because a payment is 28% to 30% of your gross income doesn’t
mean that you can afford it.
Depending on the amount of income going toward other monthly debts, a mortgage payment within these
percentages might be too expensive for you. That is a reason that lenders calculate DTIs—to get a better picture
of affordability.
As a general rule of thumb, your overall debt-to-income ratio, including your future mortgage payment, shouldn’t
exceed 36% to 43% of your gross monthly income.
To calculate your DTI, simply add up all your minimum monthly debt payments and then divide the total
by the total on your monthly gross income. If you have a monthly gross income of $6,000 and monthly
debt payments of $1,500, your debt-to-income ratio is 25%. In which case, you shouldn’t have a problem
qualifying for a mortgage.
On the other hand, if a mortgage increases your monthly debt payments to $3,000, your DTI jumps to 50%.
You might not qualify for some homes until you’ve paid down or eliminated some of your other debts. This can
include paying off car loans, student loans, credit cards, and other loans.
DEBTS
Monthly Minimum Credit Card Payments
Monthly Car Payments
Monthly Personal Loan Payments
Monthly Student Loan Payments
Monthly Child Support / Alimony
A
GROSS MONTHLY DEBT
$
$
$
$
$
$
GROSS INCOME
Monthly Gross Salary
Monthly Bonus and Overtime
Other Monthly Income
Monthly Child Support / Alimony Received
B
GROSS MONTHLY INCOME
DTI = GROSS MONTHLY DEBT (A) ÷ GROSS MONTHLY INCOME (B)
$
$
$
$
$
%

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