| Refinancing your mortgage is a great way to get rid | | | | circumstances it can go as high as 50% and still be |
| of high interest credit card payments and even pull | | | | approved. Once it goes over 50% many lenders will |
| some cash out for home repair or a needed vacation. | | | | deny the loan do to risk levels and the increased |
| But just because you have equity in your home does | | | | possibility of loan default. |
| not mean you can necessarily afford a new mortgage | | | | Your Personal DTI is easily figured out by taking your |
| payment. So before you head to the local mortgage | | | | monthly minimum credit account payments and dividing |
| company and say, i want to refinance my mortgage | | | | your gross pre tax monthly income into the amount. To |
| do a few simple calculations and see what you can | | | | keep it simple you can have roughly .45 cents of debt |
| actually afford. | | | | for every $1 you make in monthly income. So if you |
| How Much Mortgage Can You Afford? | | | | make $2000 you can have $900 in monthly debt |
| Mortgage lenders already have this one figured out for | | | | payments. |
| you and it is all in their lending guidelines. These | | | | Keep in mind that the debt to income ratio only takes |
| guidelines are a set of pre determined parameters that | | | | into account things like credit cards, mortgage |
| the lenders feel help them accurately gauge a | | | | payments, car payments and other credit accounts. It |
| borrowers ability to pay the loan back. | | | | does not take into account daily living expenses or |
| The most critical of these guidelines is the ratio of you | | | | luxury items like cable TV or cell phones so make sure |
| bills to your income. This ratio is called the debt to | | | | to leave yourself money to live on after the house |
| income ratio or DTI for short! Many lenders would | | | | payment has been made. |
| prefer to see a DTI around 45%. But under some | | | | |