| Figure Out Your Debt to Gross Salary |
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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).
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. If your ratio is falls under the 35% mark, then you're doing great and shouldn't have a hard time being approved for your mortgage. If however your debt ratio is above 35%, it may be become difficult to be approved for the loan and be prepared to pay a higher interest rate if you are approved. If you can, it is preferable to keep your total housing expense under 28 percent of monthly gross income. Keep in mind, the lower your debt-to-income ratio the better, so pay down as much debt as you can before starting the mortgage process. Once you have a good idea of what you can afford and where you want to buy, check out current mortgage rates and contact Edmonton's number one Realtor below. Here is a simple break down of the 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 = More information: Searching for condos for sale Edmonton call Darlene Strang Edmonton's number 1 real estate agent. Check out our listings here .
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