So you find you have managed to scrimp and save some money for a down cost on a house, have paid off your vehicle, and you also have found you have sufficient surplus monthly revenue for a new car payment. If you are in this position, and your car can still conduct to incur a few thousand more miles think keeping off on the buy of a new car. You may ask, "Why is this advisable?" The calculate is that most first-time homebuyers, and some veterans, do not know that your new car cost will directly sway your debt-to-income ratio.
Suppose for illustration sake, you had purchased the new car and you taste a loan officer to get pre-qualified for a mortgage loan. You state your desired price and how much you have managed to scrimp and save for the down payment. You furnish your revenue and may even furnish pay stubs and W2 forms. The loan officer methodically crunches the numbers (by telephone, in person, or even over the internet). And the loan officer promptly lets you know that you would have excellent for a higher home sales price if you didn't have "that expensive car payment!"
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You see, when determining your capability to qualify for a mortgage, in addition to your three-digit reputation score a lender looks at what is called your "debt-to-income" ratio.
A debt-to-income ratio is the percentage of your gross monthly revenue (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner's association fees, if any. It will also include your monthly consumer debt, including reputation cards, student loans, installment debt, and of course, car payments. Your debt-to-income ratio is the amount of debt you have in the form of mortgages, car loans, student loans and reputation card debt, as compared to your uncut income.
