Who cares you say, in the long run you will because this simple calculation will produce a ratio that combined with your FICO score will determine what your interest rate will be and even if you can get a mortgage.
So how do you calculate your Debt to Income Ratio -
Add all the following:
1) Current Mortgage
2) Credit Card Payments - Minimum times at least 2
3) Home Equity Loan payment
4) Student Loan Payments
5) Furniture and other installment payments
6) Alimony and child support payments
7) All other monthly payments (orthodontics, karate lessons, etc)
Got that Number? ______________________________ TOTAL
Next add up all your monthly income, Net not gross (the amount you get after all deductions have been taken out).
1) Monthly pay
2) Other annual income like rental property, side business - estimate this annually but divide it by 12
Got that number? ______________________________ TOTAL
Divide the top number by the bottom number the resulting number is the ratio. Pretty easy, Huh?
Just a heads up on the minimum FICO score (that's your credit score) it's 660 if you have less than 20% down. Don't panick yet, there are still some programs out there but I recommend you wait till you have a better grasp on your finances. Raise your FICO score, reduce your debt and set your goals. One of your goals should be to be debt free, and debt free includes no mortgage.
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