CAPACITY (DEBT-TO-INCOME RATIO)

Your ratio of debt to income is very important in the qualification for a mortgage loan. Different loan programs have varying requirements about your debt-to-income (DTI) ratio. These could range anywhere from 39%-50%. This means that your total monthly debt (including mortgage, taxes, insurance, maintenance, etc.) can only be at a maximum 39%-50% of your gross monthly income. The largest issue for first time home buyers aside from down payment is monthly debt. This includes payments such as student loans, car payments, personal loans, and credit cards. Generally speaking $500 of monthly debt equates to $100,000 in a mortgage loan (varies depending on interest rate).

*It is best to consult with a loan officer to see how much you qualify for and the best way to eliminate debt.