Many people are aware of the financial commitment that is involved when investing in a home. But what that amounts to is different for every person. You have to consider what you can afford to what a lender will allow. You have to be aware of the plenty of details involved in determining the right home for you. You may be contemplating what the right price is. Here's how to approach home ownership and determine your debt-to-income.

Calculating Your Debt-To-Income Ratio

You may not know what your DTI ratio is, but it has a lot to with how much home you can afford. To calculate, add together all the debts you owe each month and divide them by your monthly pre-tax income. For example, if your credit card is $150 and your rent is $900, your debt amount would be $1050. Divide this amount by your income, say $2500, to get 0.42. This means your DTI ratio is 0.42 or 42%.

What Your DTI Means

While a DTI in the high 20s or low 30s is good, anything that hovers above 43 percent may serve as a red flag to the lender. The lower your DTI ratio is, the more likely it is that a lender will approve your mortgage application. This is because you'll have the disposable income to deal with financial hurdles. If your dream home has you hovering close to this amount, it may be a sign that it's a bit out of reach.

How Do You Want To Live?

It's quite common to be taken over when you find your dream home and decide to commit. However, buying a home is a huge financial commitment. If you're buying more than you can afford it may drain your well-being over time. Instead of diving in, determine other expenses that are likely to come up in the next few years. Whether it's travel, a child, or a new car. You know that it is important to have the home you want and budget when buying it. But you'll still need financial wiggle room in case something comes up.

There are a lot of factors involved in determining how much house you can afford. By calculating your DTI ratio and being aware of your spending plans, you'll be well on your way. to an ideal price range.

If you're currently on the market for a home, our team can help you every step of the way. Contact one of our real estate professionals for more information.