Your affordability is based upon an analysis of your gross monthly income and the monthly debts that you are currently paying. There are 2 different “debt to income” ratios that lenders will analyze. The first or “Housing Ratio” is a comparison of your monthly mortgage payment divided by your gross monthly income (before taxes). The second or “Total Debt Ratio” is a comparison of all your projected monthly payments (including mortgage) divided by your gross monthly income. Typically, lenders want the “Housing Ratio” to be at or below 30% and the “Total Debt Ratio” at or below 40%. However, every loan scenario is different and these percentage numbers should be used as “benchmark” figures. The most important figure to determine your affordability is your “comfort zone” of a monthly PITI payment.
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