One of the most important aspects of qualifying for a mortgage is your debt-to-income ratio. You may have heard 30% or 43% thrown around with the words debt-to-income as a measure of how much you can afford to pay every month. The ratio works like this: you earn $6,000 a month before taxes and deductions, which means you have $1,800 a month available to you for your debt service. $600 of that available amount goes toward paying your outstanding debts and leaves you with $1,200 to go toward a mortgage according to the debt-to-income ratio guideline.
You can max out that $1,200 a month for a mortgage and stay within the 30% rule, or you can push further and go as high as 43% on the ratio. The higher the debt-to-income ratio you go, the more money you have available to buy a home and still obtain a qualified mortgage. Your ability to get a higher percentage depends on a few factors and you should always discuss the pros and cons of going higher with a mortgage specialist.
Source: Consumer Financial Protection Bureau
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