A debt-to-income ratio is the percentage of gross monthly income (before taxes) that a buyer spends on debt. This will include monthly housing costs, including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include monthly consumer debt, including credit cards, student loans, installment debt, and….…car payments.
How a New Payment Reduces A Purchase Price
For example, a buyer earns $5000 a month and has a car payment of $400. Using an interest rate of 8.0%, she would qualify for approximately $55,000 less than if she did not have the car payment.
Even if the buyer feels he can afford the car payment, mortgage companies approve the mortgage based on their guidelines, not the buyer's. However, the buyer should still take the time to get pre-qualified by a lender.
Contact a loan officer to get pre-qualified for a mortgage loan. State your desired price and how much you can put down. Provide your income, pay stubs and W2 forms and any other income (i.e., alimony) for consideration. The loan officer will determine the amount by examining the numbers and going by federal guidelines.
Remember, buying a home is always a great consideration!
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