Quote:Bob Schroeck wrote:That may be what financial advisers recommend, but I actually worked for a mortgage company for a while and a) they based the debt to income ratios on gross income, and b) the mortgage to income ratio was 28%, while the total debt to income ratio was 36%. That was over twenty years ago, so I probably shouldn't try to make any claims about current rules.
The thing is, the loan officer is supposed to take your pay into account when determining whether you qualify for a loan. (Supposed to. During times like the years leading up to the Great Recession, they don't do their due diligence and will offer mortgages to your dog, but we're still in the recovery from a real estate crash, so it's probably safe to assume they're still being paranoid.) Your projected monthly payment should be equal to or below 25% of your net (take home) pay for a month in order for the bank to reasonably offer you the mortgage. That should include any escrow if the bank insists on handling (or you've decided to let them handle) your property taxes and insurance. If it's not, don't forget to factor those two into your "real" monthly payment.
Note: people generally like to close on the last day of the month. That's because otherwise you have to cough up the interest for the number of days between when you actually close and the end of the month at settlement. If you can afford a couple days of interest, it might be worth it to close a little earlier so you actually have time to go through the documents thoroughly.