Calculate Your Debt Ratio
You will hear the term ‘Debt Ratio” several times when you apply for a mortgage loan. Lenders look at two types of Debt Ratio when qualifying you for a loan: Housing Debt Ratio and Total Debt Ratio
Debt Ratio is a simple formula that caculates what percentage of your monthly gross income goes towards housing payments and other debts.
For example, let’s say:
Your total gross monthly income is $4,000.00
Your new housing payment (including taxes, insurance and HOA fees) will be $1,500.00
Divide 1,500 by 4,000 (4000 / 1500)
You will get an answer of 0.375; Change this answer into a percentage by moving the decimal point two places to the right and it tells you your housing debt ratio is 37.5%
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
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