When deciding if you can afford to finance a home, it is important to know how much you can afford. Lenders do not want to approve you for a loan that could potentially overload you. This is the perfect time to review your personal financial situation; comparing your monthly debt to your monthly income. You need to have the ability to cover your current bills, as well as save for the future, and pay for any unforeseen emergencies.
To determine your debt-to-income ratio, you can do a few simple calculations. Information you will need:
Monthly Income – This is any regular earned income that you can document. If you can’t document it or it doesn’t show on your tax return, then you can’t use it in your monthly income figure. There are some sources of unearned income that you can use, such as alimony or lottery pay-offs.
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