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When getting a mortgage, the lender will look at your debt-to-income ratio in order to come up with the amount of money that they will lend you. What this ratio does is measure your pre-tax income against the other expenses that you will have on a month-to-month basis. This includes both housing and non-housing expenses, which as student loans, car payments, and child support. What the lender will do is come up with an amount that is no more than 29% of your gross income for your loan amount.
This amount will also have to be no more than 41% of your total income when these other payments are factored in. Things like the cash needed for a down payment and closing costs are also factored into this amount, as well as your credit history. Basically, your lender will come up with the maximum amount that they would feel lending to you bases on your current income and your current expenses. If they feel as though you would be a very high risk because of your current expenses, they may reject your application completely, so make sure that the time is right when applying for a loan.
[ ..More About Cincinnati Debt To Income Ratio ]
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