Before you even start looking for a mortgage you should determine how much debt you can manage. As with any other loan , when you shop for a mortgage, one of the principal areas a mortgage lender takes into consideration before approving a mortgage is the debt to income ratio (which affects your credit score).

The ratio is based between how much you owe each month on personal debt and how much you earn. The ratio gives you and your mortgage lender the percentage of debt you owe in relation to how much money you are making which gives the lender an idea of how much of a mortgage to give you that suites your financial state.

To arrive at your particular debt to income ratio, take all your monthly payments, such as: insurance, car payments and credit cards, and leave out groceries and utilities. Add them all up including your potential mortgage and home insurance payments and then divide them by your take home salary.

Note: When shopping for a mortgage is that your debt-to-income ratio should be no higher than 36%. Anything above this could mean you’ll be denied credit or charged a higher interest rate on your loan.

Note: You will want to make sure that your total expenses for your household remains under 28 percent of your gross monthly salary. Though there some mortgage lenders that will make an exception based on your credit history and ability to repay the loan, keeping your expenses under will help the application process. Once you have determined the amount you are willing to spend it is time to be pre0approved for a mortgage and star looking for a home with your realtor.

Debt to income formula: *Minimum monthly credit card payments: + Monthly car loan payments: + Other monthly debt payments: + Expected mortgage payments: *Total = *Your debt-to-income ratio is: *Your total by your monthly gross income =

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