and for my most fun post yet!

how to calculate DTI and use it to see how much of a monthly mortgage you can afford!!

just so you know, different types of loans will give you different maximum DTI that they allow. for this post we will be using 43%, which is common, but *again* it can vary.

to calculate your current DTI (as i have explained in a previous post is very good to know so you can be prepared for what comes next in your home buying journey) is easy:

add up all your monthly debts you owe for credit cards and other loans (like car, personal, student, etc). remember that number.

now figure out how much you make in a month *before *taxes.

got it? okay.

now divide your monthly debt by your monthly income. if you don’t remember how to switch from a decimal to a percent in your head, you can multiply that decimal you get by 100 and you’ve got your %!

example:

- $50 credit card + $50 credit card + $250 car payment = $350 debt
- $25 an hour x 30 hrs a week = $750 x 4 (for four weeks in a month) = $3000 a month income
- 350/3000 = .1166 x 100 = 11.66, or 11.66 % current DTI!

great! my DTI is well below the max allowable 43% so how do i figure out how much of a monthly mortgage i can afford while staying under that 43% ?

funny you should ask! i’ll show you!

first, make yourself a chart like this: (you don’t have to write the explanations obviously)

**TA DA! **now you know how to calculate DTI *and *use it to see what you can afford to pay each month for a mortgage!

if the payment is less than you were hoping, seeing this all written out can help you come up with a plan to get rid of some of your debt to decrease your DTI.

this was so helpful to me while trying to get financially fit. i would write out this chart several times, each time leaving some debt omitted and watched my max payment go up and up:

it really gave me a kick in the pants to pay off some of my debts. plus, it was really exciting to do the chart again once i had actually paid off some debt because i knew i could afford what i wanted.

this is such a great exercise to do before you start calling for preapproval. it’s very empowering knowing your situation and being able to ask for exactly what you want and knowing there’s a good chance at getting it, instead of wondering or having someone tell you it’s not possible.

again, it’s better to know where you’re at *before *you start the preapproval process and especially before you start looking at houses. knowledge is power!

**HAPPY MATH-ing ! **