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Your Mortgage to Income Ratio (and How it Benefits You?)

Michael Nolen of Coldwell Banker Realty
by Michael Nolen of Coldwell Banker Realty on April 4, 2019 at 11:39 AM

Buying a home or condo is an exciting part in anyone's life. One important step in many buying processes is getting a mortgage loan. Understanding your mortgage to income ratio is particularly useful and your mortgage payment is an important monthly expense.

In this post, I'll explain how you can easily calculate your mortgage to income ratio and use it to prepare for buying a home.


Why is it important to know your mortgage to income ratio?

Whether you're a first time home buyer or familiar with the home buying process, it benefits you to deepen your knowledge.


Mortgage lenders have guidelines

Mortgage lenders have guidelines for the amount of debt you're allowed. Your future mortgage payment is a factor in a mortgage lenders debt to income qualifications. The more debt you have against you limits the amount your future monthly mortgage payment can be.


Breakdown your monthly expenses

It's important to separate how much of your debt is your mortgage payment and how much is from your other credit debt expenses. This can help plan for a monthly budget and housing expenses. 

A higher mortgage to income percentage will lower the amount of additional credit debts, student loans, car loans, personal loans, etc. that can be used in qualifying your overall debt to income ratio.  

A helpful resource is my mortgage calculator tool. It's available on each property details page on my website's home search. It's an easy to use tool to help you plan.



How to Calculate Your Mortgage to Income Ratio?


How you calculate your mortgage to income ratio?

This is an easy math problem. 

  • First, you'll need to add up your gross monthly income.
  • Second, determine your estimated or current monthly mortgage payment, or your monthly rent payment.
  • Last, divide your monthly mortgage or rent payment by your gross monthly income.


An example calculation looks like this

$1,200 (monthly mortgage or rent payment)  /  $4,000 (gross monthly income) = 30% percent or 0.3


Another article to check out is How Much Mortgage Can I Afford (with a $1,200 payment). This article gives you helpful tools and resources for you to plan for homeownership.

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Michael Nolen of Coldwell Banker Realty
Michael brings a diverse background of mortgage, loan servicing and housing experience. Michael offers his clients a variety of helpful resources, guides and services that helps make buying and selling coastal real estate in the Ocean City, Ocean Pines, and Coastal Delaware markets. Michael has over 11 years industry experience and invests and manages vacation rental properties in the Ocean City, MD area through Nolen Invest and Nolen Vacation Rentals.
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