What is my Purchasing Power? How to Calculate Debt-to-Income Ratio for a Mortgage

May 2, 2023
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Your debt-to-income ratio (DTI) is one of the most important factors lenders consider when you apply for a mortgage. It is a measure of your ability to afford monthly debt payments, including your mortgage, as a percentage of your gross monthly income.

A lower DTI ratio generally means you are a more attractive borrower and it will result in higher purchasing power.

To calculate your DTI ratio, follow these steps:

  1. Add up all of your monthly debt payments, including your mortgage, car loans, student loans, credit card payments, and any other debts.
  2. Divide the total by your gross monthly income.
  3. Multiply by 100 to express your DTI ratio as a percentage.

For example, if your monthly debt payments total $2,000 and your gross monthly income is $5,000, your DTI ratio would be 40%.

Lenders typically have a maximum DTI ratio they will accept. This maximum DTI for Non-Jumbo loans is 50%. The maximum DTI for Jumbo loans is usually between 43-45% depending on the lender.

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