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.
Debt to income is a very simple calculation and is derived from the amount you pay out to bills each month versus the amount of your take home salary. Lenders will calculate this ratio in order to determine whether or not you will be financially able to handle the added debt of a mortgage.
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.
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.
Note: You will want to make sure that your total expenses for your household remains under 28 percent of your gross monthly salary. Though there some mortgage lenders that will make an exception based on your credit history and ability to repay the loan, keeping your expenses under will help the application process. Once you have determined the amount you are willing to spend it is time to be pre0approved for a mortgage and star looking for a home with your realtor.
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 condos in Edmonton contact Darlene Strang Edmonton’s condo expert and number one Real estate agent in Edmonton. Trust experience and your personal Realtor for life.
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