How Much Home Can I Afford | How to Calculate Your DTI Ratio | Calculate Your Debt to Income Ratio

hi this is Shawn Heaton Hill the real real tour getting you over the hill to home ownership and there's one number that I want to make sure that all of my homebuyers know before they get pre-qualified for a loan no it's not your credit score's even though those are very important it is your debt to income ratio most lenders call it your DTI what is your DTI how to calculate it I'm going to give you an example today and then I'm going to give you some resources to calculate yours on your own so the first thing is you have to know how much you make so I'm going to give you an example of somebody making $50,000 a year so you take whatever you make your salary if your hourly you want to add that up or you want to look at your last tax return or your w-2 from this year and you want to divide that number by 12 so whatever you make on a yearly basis divide that number by 12 and that will give you your monthly gross income before any taxes are taken out that's what lenders are looking for they're looking for your monthly gross income to try to determine if you can afford a mortgage payment okay so you need to know how much you make every month before taxes so divide your yearly income divided by 12 that's gonna give you your monthly or you just take your your last 30 days of check stubs and figure out what you're bringing home on a regular basis every month okay once you have that number and for our example is four thousand one hundred and sixty-seven dollars once you have that number I want you to figure out what all of your debt payments are so let's go over this is debt so for this example this person has a Discover card and the minimum payment so you have to do the entire balance but you need to know the minimum payment usually on your debt so that's gonna be $75 then this person has a Visa card and that is $100 and now again its minimum payment don't worry about the balance what's the minimum to pay every month to keep that account in good standing so next is a car payment this person has a car payment of $400 and then lastly is student loans now I'm going to do a whole new video on student loans but this is assuming that you have a $350 student loan payment now if you're like on any kind of income basis really quickly if you want any kind of income based plan you're not paying your full amount something along those lines then some lenders particularly for FHA loans will take 1% of your loan balance and that will bring your debt-to-income ratio really high because they never know where you're going when you're going to get out of your repayment so please like and subscribe to my channel I'm going to do a whole thing separate on how they calculate student loans into your debt to income ratio but for right now I want to make sure you understand how to calculate your debt to income ratio in the first place okay so the student loan payment is 3050 so the total debt that this person has is nine hundred and twenty-five dollars total debt so if I take that total debt I'm gonna divide it by their total gross monthly income and that's going to give me a debt to income ratio of 22 percent so this person's debt to income ratio is 22 percent which is pretty decent however they want to buy a house so that's going to increase their debt to income ratio because now they're borrowing money for mortgage now most lenders want to see debt to income ratios between 36% and I would say low 40s so say 45 you may find a few loans that will go up to 50 but that's rare so we're talking about 36 so 45 depending on what kind of loan you're doing okay so you want to make sure you're kind of 36 is ideal some lenders will go like 41 three when you include your because they're gonna determine okay with all of your bills do we think that you can also afford a mortgage so for this example this person wanted to add to their death twelve fifty that's about a house that's about two hundred thousand two hundred hundred thousand you might pay about twelve fifty a month so can they afford that but can they do that and still keep a low debt to income ratio so when I add this 925 to the twelve fifty anticipated mortgage payment that's gonna bring me up to twenty one seventy five and I have to do the same thing twenty 175 divided divided by the forty one 67 guess what it gives me a fifty two percent debt to income ratio that's high some lenders are not gonna give you a loan on that debt to income ratio so what happens now can you get a house probably but not for two hundred thousand that's when they're gonna try to prequalify you for less so they might pre-qualified you for $1,800 mortgage a seven hundred dollar mortgage because that will bring your debt-to-income ratio and move this a little bit that's gonna bring your debt-to-income ratio at 41% $700 more than is thirty nine percent so it's very important that you understand how to calculate your debt to income ratio all it is is all of your debt payments divided by your gross monthly income again it's all of your debt payments divided by your gross monthly income please calculate this number know what this number is before you get pre-qualified please like and subscribe to my channel so for next week when we go of our student loans if you have any student loans you'll know how that's calculated for all of the loan types remember only four types of loans the USDA VA or FHA so you need to know how your student loan debt can affect or impact your ability to get a mortgage I'm listing down below a bank great debt to income ratio calculator for you to use and make it super easy so you will know your debt to income ratio if you have any questions about calculating your debt to income ratio please put in the comments if you're married you put both of your debt both of your gross monthly incomes together to determine what you are anybody that's on the loan you want to put that information together all the debt all the income and then come up with a combined debt to income ratio thank you so much for watching please like and subscribe to my channel if you're a first time homebuyer have lots of video videos about the process is like and subscribe

Channel: Shaheedah Hill

Views: 180,004

Keywords: Shaheedah Hill, How to calculate my DTi, How to calculate my Debt to income ratio, how much house can I afford, what is a dti, what is a debt to income ratio, total debt ratio calculator, debt to income ratio to buy a house, what is a good dti, what is a good debt to income ratio, credit ratio formula, first time homebuyer, how to qualify for a mortgage, debt to income ratio, DTI, How to Calculate Your Debt to Income Ratio, How much home can I afford

Id: S3glBuf2fRw

Length: 7min 4sec (424 seconds)

Published: Thu Jan 30 2020