Calculating Your Buying Power

Buying Power

Buying power indicates how much you can borrow from a mortgage lender to purchase a home, without exceeding your ability to repay the loan. There are a lot of key factors that can affect your buying power, but the one to start with is calculating your Debt-to-Income Ratio (DTI). Your DTI is the ratio of your monthly debt payments (including the new mortgage) to your gross monthly income. A lower DTI increases your buying power and what you can afford when looking for a new home. Let's check out an example of calculating your DTI!

For Example:

• Annual Gross Income: $75,000
• Monthly Gross Income: $75,000 / 12 = $6,250
• Current Monthly Expenses (debt payments): $1,200 (this can include car payments, student loans, credit card debt, existing mortgages, etc.)
• Desired Housing Payment: $2,000 (This typically includes mortgage, property taxes, homeowners insurance, etc.)

You'll want to take your monthly debts divided by gross monthly income - and that is your Debt-to-Income! In this example, your DTI would be 51%. This percentage helps your Loan Officer determine how much you can afford, and what loan type you would qualify for. 

Make it easy on yourself and head on over to our trusted lender, Victory Mortgage, and they can help you get started! Our Loan Officers are experts in New Home Construction lending and can guide you through the process. Get started today! 

Interested in learning more? Hear from Loan Officer Megan about calculating your DTI!

Victory Mortgage NMLS 461249, Equal Housing Lender

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