by Julio Ibarra

Created on: September 14, 2007   Last Updated: December 15, 2007

Determining the down payment on a house?

How to determine the down payment on a house? Your concern should also be, "can I afford this home?" The next thought, "how is my credit score?" These are the questions that you should tackle before the thought of a down payment. Learn to qualify yourself before you search to buy a home. Follow my examples and know if you can buy.

Now let us put it all together, let's say your credit has been checked and your credit score is in the mid 690 or better. With the right lender they might decide to give you 100% financing, this is not something I would recommend. If you can, put down as much as you can, doing so just might help to reduce the interest rate, and surely will reduce those monthly payment.

First things first, let us see if you qualify. There is a little matter of dept ratio that we should all be concerned about, it has quite a bit to do with you expenses. Overly spending because you feel you deserve that item now? While waiting can help you keep that dept ratio in a good level.

This easy math tool can be used any where, where there is consumer dept and a net base income. Here is how we check our dept ratio to determine your expense verses your income.

1. The formula for this is:

(D) Dept
(I) Income
(R) Dept Ratio

D / I = R (%)

What you have done is to determine the percentage of your net income verses your expenses. Now if you just subtract you're your monthly rent you would have a better idea as to whether or not you are able to accommodate a mortgage. Keep in mind that the formula shown above is not the complete calculations of a home mortgage. To calculate the home mortgage follow the same process but add PITI (Principal, Interest, Taxes and Insurance) add these cost to your dept then divide base on your income.

Example:

PITI + D / I = R (%)

This formula will offer the best scenario for mortgage affordability. The dept ratio percentage will help you when speaking to a mortgage professional. Most lenders will prefer a dept ratio of 34 to 48 percent (%); anything above 48 percent chances are that you are just making ends meet. Please, keep in mind this will depend on the lender to make the final determination.

NOTE:
If you are having difficult time figuring your PITI contact your local lender or type on a search engine "Mortgage Calculator" you will be shocked as to how many of these web will pop-up. One of my favorites is "Bankrate.com" this site gives you an assortment of tool and the national rate.

Most brokers and loan

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