How Can I Figure Out What My Limit is for a Mortgage?

You want to get some idea on what your options are before you go talk to a professional? You do not like the idea that a Loan Officer has to check your credit while you wait endlessly to get an answer? You are not alone. There are a few steps you can follow to figure it out kind of for yourself.

Step 1: Make a total op your recurring payments and monthly expenses. You have to know how much you have already tight up for every month to come. There is no need to write down things that you are paying but are not reported to the credit bureau. The things you really have to take into account are the minimum monthly payments on your credit cards, all bank loans you have not matter what it was for, and whatever other recurring payment.

Do not talk about insurance payments other than your House Insurance, utilities, cell phone bills, or anything that you are able to cancel overnight.

If you are shopping for a mortgage you are going to have to include "Insurance and tax" as a monthly expense.

Do not include the mortgage costs you are currently paying if it is a refinancing mortgage you are looking for. After all, the payment amount will be different once you are done with the process.

Step 2: See how much you make a month. Do not just consider your personal income, but the income of all of you who are listed on the paperwork for the mortgage. Here are some things that you have to keep in mind.

· If you work overtime more as a rule than as just some extra income than you can add that into the calculation. Make sure you only do that if you worked overtime for 2 years without skipping a week.

· If your doctor confirms in writing that disability is a definite at least for the next two years and that you will collect payments throughout those two years.

· If you have a renter with a lease in a property that is on your name so that there is some security in receiving monthly payments throughout a certain time period, add these rent payments to the calculation of your income. Without a lease you have to be creative in showing that you have an income of this rental property. One way to do that is to show proof of canceled checks from your renter.

Step 3: Find your Debt to Income Ratio (DTI)

To see if you can get a mortgage the banks will check out the "DTI". Your monthly payments can only make up a certain percent of what you collect every month.

Your monthly expenses divided by your income will give you the DTI. (E.g.: a couple with $4,000 in bills every month and $10,000 in income ends up with a DTI of .40 or a 40% DTI)

The cause of the current economic or financial crisis is a result of giving mortgages with very high DTI's, even 50 or 60% DTI's. Every mortgage broker can go up to a different DTI, but 38% is a decent estimate.

If you have decent credit and other factors in your favor, you are buying a home for the first time, and you want a FHA mortgage, you have a chance to be approved with a 48% DTI even.

Follow these guidelines and you will have an estimate on how much you can borrow. This "how to" information can be a great benefit to you.

Get shopping for a mortgage!