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What is debt-to-income ratio for a mortgage?


To qualify for a mortgage, you first have to figure out what you can afford to pay per month.  You have other expenses, of course, and debt has a limit.  Lenders will only accept a certain amount of your income for your mortgage payment, and they will tell you what you can afford to pay for your mortgage based on your income and other debts.  The amount can vary depending on the type of loan and the down payment, but usually only 28 percent of your total monthly income can go toward the mortgage payment, and 36 percent of your total income , including the mortgage, can go toward your total monthly debt. This would include a car loan, student loan, or any other long-term financial commitment, including credit card loans. This is called a debt-to-income ratio.  Your total monthly income is what you earn from all sources, before taxes. The debt-to-income ratio of 28/36 is the standard, but sometimes you can negotiate with the lender, or pay a bigger down payment.

The numbers don't stop here.  What about other expenses; food, for example, and plans to travel, or hobbies. You are the only one who really knows how much you can afford to pay per month.  Lenders look at the numbers, but your monthly budget is made up of more than just loans, and if it isn't well thought out, a few years later you might find yourself unable to keep up with all your payments.

It's much harder to qualify for a loan today than it was a few years ago, during the housing boom.  It used to be easy to get credit, and almost anyone could get a loan.  You have to be able to afford a house to qualify for a mortgage, and lenders do a thorough background check.