I am looking at buying my first house and was just curious what the proper debt to income ration should be. I always figure my numbers a little higher.
currently i am looking at a mortgage payment that is 25% on my net income. when you add in taxes and insurance i would be at roughly 34%.
p.s. - the reason the tax's are so high is because i am looking at a foreclosed house, so the taxes on it are at market value not what i would be paying for it.
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I am looking at buying my first house and was just curious what the proper debt to income ration should be. I always figure my numbers a little higher.
currently i am looking at a mortgage payment that is 25% on my net income. when you add in taxes and insurance i would be at roughly 34%.
p.s. - the reason the tax's are so high is because i am looking at a foreclosed house, so the taxes on it are at market value not what i would be paying for it.
34% may be a little high...usually 30% is a good benchmark. 34% is still def doable
you can always appeal prop taxes (in NJ you can). most houses were reassessed in 06 so towns could count and spend their funny money. now they must pay it back
34% may be a little high...usually 30% is a good benchmark. 34% is still def doable
you can always appeal prop taxes (in NJ you can). most houses were reassessed in 06 so towns could count and spend their funny money. now they must pay it back
thanks koaj, i would get the property taxes looked at and i am expecting a 20% drop on the value, so that would swing me back down to 30%-31%. but it will take a year or so before they drop off. thanks for the help
thanks koaj, i would get the property taxes looked at and i am expecting a 20% drop on the value, so that would swing me back down to 30%-31%. but it will take a year or so before they drop off. thanks for the help
I used to be in lending and I personally got uncomfortable when going over 40% DTI. However, one important thing to keep in mind is disposable income. If you make $10k/mo. with $4k total monthly debt, that leaves $6k disposable income. Sure this is 40% DTI, but plenty of disposable income remains so the risk is minimal. By the same token if you make $4k/mo. with $1600/mo. debt, you're at 40% but only have $2400 disposable, which is obviously riskier.
Keep in mind that when computing your DTI, the bank will consider the estimated mortgage payment + all other debt (car, credit cards, etc.). GL.
I used to be in lending and I personally got uncomfortable when going over 40% DTI. However, one important thing to keep in mind is disposable income. If you make $10k/mo. with $4k total monthly debt, that leaves $6k disposable income. Sure this is 40% DTI, but plenty of disposable income remains so the risk is minimal. By the same token if you make $4k/mo. with $1600/mo. debt, you're at 40% but only have $2400 disposable, which is obviously riskier.
Keep in mind that when computing your DTI, the bank will consider the estimated mortgage payment + all other debt (car, credit cards, etc.). GL.
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