So you want to invest in a new home but you are not sure if you can afford a home. Well here is a simple calculation that will help you understand your Debt to Income Ratio.
First calculate your debt:
Add together all that are applicable:
Minimum monthly credit card payments:
Minimum monthly student loan payments:
Monthly car payments:
Monthly alimony payments
Monthly child support payments
Any other loans or credit card payments you make per month:
The amount you will be paying per month on a mortgage payment (include all taxes and insurance)
TOTAL_________
Now divided your total debt by your total gross income and include any monies you receive for alimony or investments.
Debt/Income = DTI Ratio (Debt to income ratio)
You will want to have a DTI that is under 31%. The important thing is to calculate in the home mortgage payment to get a pretty accurate DTI. If you are up in the 40s, 50s or higher you should probably think about paying off some debt prior to buying a home so you have a better chance of getting a good loan with a good interest rate.
I hope you found this information helpful. Please let me know if you have any questions. Also if you are thinking about buying a new home in the Colorado Springs area please feel free to visit Campbell Homes at www.campbellhomes.com
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