Debt to Income Ratio

It's actually a lot easier to calculate your debt to income ratio than you think. It's a technical sounding term that the bank uses but it really isn't as bad as it seems. When you break it down it's actually a very logical term because the bank weighs you monthly debt against your gross monthly income. That's the amount of income per year before taxes divided by 12 months.

There's not really a specific debt to income calculator but there is a mortgage calculator that you can use to figure out the monthly payment from the bank. Then you need to add taxes, insurance and a condo fee (if there is one) to that. Then you have the entire monthly payment that will be added to you bills.

Then you need to add up all of your monthly payments including car payment, student loans, credit cards etc. Credit card loans aren't as bad as you think because all you have to do is add in the minimum monthly payment as monthly debt. They wont weigh in all of the credit debt you have , but the more you have the higher that monthly payment will be and it will definitely hurt your buying power with the bank.

Buying power is the amount of a loan that you can afford VS. debt to income ratio being the percentage of debt you have compared to your income. Once you figured out your debt to income ratio you can use a mortgage calculator to determine your buying power. Plug in a few different numbers with the current interest rate to see how much you can afford. You might hear the bank also refer to this as your borrowing power. You can see how it would mean the same thing.

Debt to Income Ratio Calculator

These percentages include the new mortgage payment you're trying to get.