Your debt to income ratio is simply a measurement to determine how much of a mortgage you can afford. The number is arrived at by deviding all of your monthly debts (including your total housing expense) by your gross monthly income.

Qualifying Ratios

It is important to know what your debt income ratio will be. If it is too high, you will not qualify for a mortgage. Fannie Mae and Freddie Mac as well as FHA like to see Debt to Income Ratios around 33%. This however is not carved in stone. I have seen people with ratios at 50% still get approved. Although it is much harder to do so.

Understanding the qualifying ratio

It is important to understand the concept of DTI before you begin to shop for a home or a refinance. If your DTI is too high, you can make the proper adjustments by paying off some debt or somehow reducing your monthly burden in order to qualify for mortage money.

As mortgage guidelines tighten, you must be aware of just where you stand. Before you apply for a mortgage, do your homework. Look at all the debts on your credit report. If possible, try to pay down as much debt as you can before the mortgage process begins.

The lower your debt to income ratio is, the easier it will be to get approved and the easier it will be for you to make your mortgage payment every month.