![]() For example, if your housing expenses will be $2,000 and your monthly household income before withheld taxes is $7,000, your DTI ratio would be about 28.6 percent (2,000 -:- 7,000 x 100 = 28.57 percent).īefore doing business with you, lenders also consider your other monthly debt obligations along with your projected housing expenses. To determine your DTI ratio, divide your monthly mortgage payment, including taxes and insurance, by your gross monthly income. Lenders typically don't want your home debt-to-income ratio to exceed 28 percent. Homeowners insurance and property taxes are not included. Your monthly principal and interest payments would be around $763. Finally, to get "n," you would multiply your loan term by 12 to get the total number of months for your mortgage, which in this case would be 360. In this scenario, the monthly interest rate would be. Then, to calculate your monthly interest rate, or "r," you would divide the annual interest rate by 12. To calculate "P," you would first subtract 20 percent from the $200,000 home price to get a total amount borrowed of $160,000. The lender offers an interest rate of 4 percent. To see this formula in practice, let's say you're purchasing a $200,000 home with a 30-year loan and putting down 20 percent. This is the number of years of your loan multiplied by 12. n = the number of monthly loan payments.This is the annual rate that your lender provides divided by 12 months. M = the total monthly mortgage payment.If you want to calculate your monthly mortgage payment manually, or simply understand how it's calculated, use this formula: M=P Use the prepayment section to discover how prepaying will affect what you pay in interest over the life of the loan. ![]()
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