You debt ratio seems to be very important to the bank and several things affect how good it is. They figure it out by dividing your expenses into your income and getting a percentage that they think is good for anyone to uphold. They don't want you to be spending too much of your income or they won't give you the loan you're looking for.
There are debt ratio calculators you can use to help you. I just recommend using a standard mortgage calculator because you can get a mortgage payment by using the current interest rates. Once you have the mortgage payment amount and the monthly taxes you know how much you're looking at spending.
Once you get the mortgage payment that you can afford it will give you a good idea of how much you can borrow. The taxes are different on every home so you may need to adjust the homes value to make sure you stay within the spending amount you can afford. So if your taxes end up being $100 more per month on the home you really like it affects your borrowing power by that much as well.
So you will have to look at a home that has $100 per month less of a mortgage payment. that means getting a different interest rate such as an ARM rate or interest only loan. Adjustable rates have lower interest rates to start because they are slightly more risky. A calculator will show you the difference in payment so make sure to always keep one handy when looking at homes.
The banks will probably figure out your borrowing power at the same time they figure out your debt to income ratio because they use the same figures to get both numbers. They are very similar and also give about the same information about how much you can borrow. Just make sure the interest rates don't change while you're going through the buying process or your mortgage payment will change as well.
Some banks allow you to lock in a mortgage rate so that it doesn't change before you actually get your mortgage. Mortgage calculators are very helpful with the changing interest rates because you can immediately see the difference in payment.
