Many articles talk about buying the amount of house you can afford. That is easier said than determined. Curiously, what few know is that there is a calculation used by many lenders that can be a good guide to know how much house you can buy. We present the 28/36 rule to pay your mortgage.
The 28/36 rule is a mortgage benchmark based on debt-to-income (DTI) ratios. that homebuyers can use to prevent their finances from suffering from overpayments.
In fact, Many lenders in the United States use this rule to decide whether to approve your mortgage application.. For them it is important to know how much house with debt you are able to solve. If they don’t do this debt-to-income ratio (DTI) calculation, they would be putting their capital at risk.
According to experts, the 28/36 rule establishes that a mortgage borrower/household you must use no more than 28% of your gross monthly income for housing expenses and no more than 36% of your gross monthly income for all debt serviceincluding housing.
There are some important considerations to take into account when calculating housing costs, because many people only consider their monthly mortgage payment. Among these costs, You should also include the principal and interest you pay on your mortgage, homeowner’s insurance, housing association (HOA) fees, etc.including the payment of services and other real estate needs.
Let’s say you earn $6,500 a month before taxes or other deductions from your paycheck. The general rule states that your monthly mortgage payment must not exceed $1,820which is the result of the $6,500 times 28% (6,500 x 0.28), and which your total monthly debt paymentsincluding housing, must not exceed $2,340 dollarswhich is the result of $6,500 times 36% (6,500 x 0.36).
Now, in this last result, we must take into account the other types of debt, such as credit cards. If, for example, you have a total extra debt of $1,000to the result of 36%, you have to subtract them from the $2,340 dollars (2,340 – 1,000 = 1,340), you mean that you would only have to spend up to $1,340 on your mortgage. As you can see, for your credit card debt, you would have to pay less than your available 28% ($1,820 dollars).
Therefore, in calculating the DTI ratio of your monthly debt obligations, the following payments are contemplated:
• Future mortgage payment
• Credit cards
• Student loans
• Auto loans
• Personal loans
• Alimony and child support payments
• Joint loans
And usually the DTI does not include utility bills, cable, cell phone, Internet and insurance. On a monthly budget, no matter how much the lender tells you that you qualify for a certain monthly amount based on the 28/36 rule, you should consider past paymentsas well as home repairs and maintenance, which can amount to an average of 1% or 2% of the value of the home each year.
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