Friday, April 18, 2008

Buy The House Before The Car

Debt to Income Ratio

When qualifying for a loan, the lender will analyze your debt to income ratio. It is the percentage of your gross monthly income (before taxes) that you spend on debt. (monthly housing costs, including principal, interest, taxes, insurance, and homeowner's association fees, credit cards, student loans, installment debt and car payment).

Let's say that you earn $5,000.00 per month and have a car payment of $400.00 per month. Using a rate of 8%, you would qualify for $55,000.00 less house than if you had no car payment.

Understand why not to buy the car first?

Randal Newhouse

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