Debt-to-income ratio. It is an important concept that you will then know if the house buying process. It contains a formula that is used to make the maximum mortgage amount you when determining the conditions for buying a house. It is used by lenders to determine how much house you can afford.
Your personal debt-to-income ratio is the percentage of monthly gross income (before tax) that is used to pay your monthly debts. There are two commonly used calculationsLenders "front" ratio and "back" money.
The "front" ratio is the percentage of monthly gross income (before tax), which is used for housing costs, including principal, interest, taxes, insurance, mortgage insurance paid (if applicable) and homeowners association fees ( if applicable). The "back ratio" provides the same information, but also takes into account your monthly consumer debt. This can be car payments, credit card debt, installment loans and other relatedExpenses.
A common guideline for debt-to-income ratio is 33/38. This means that your housing costs not exceed 33 percent of monthly income allowed. If the monthly consumer debt and housing costs, you should not be devoted to more than 38 percent of monthly income to meet these costs.
For example: If you should be $ 5000 a month and for the above guidelines, your maximum monthly housing cost about $ 1650. If you do not forget your consumer debt, yourHousing and credit, monthly costs should be around $ 1900.
Remember that these guidelines are flexible. If you have a small down payment or have bad credit, the guidelines are stricter. If you have a large down payment or excellent credit quality, the guidelines are less stringent. This will give you a basic idea of what you can afford it and if it is the right time to buy a house. In some cases, you need to keep saving and to pay those creditCards.
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