Hey everyone in today's video we will show you how to use the houseit debt to income
ratio calculator.
Now the calculator helps you figure out both your front-end and back-end debt to income
ratio and those ratios are very important when you think about full affordability for
your mortgage, for example, or if you're buying a co-op in New York City, how much you can
afford and comply with any co-op requirements on debt to income ratio.
So if you're not already on the calculator there's two ways to get here, the first way
is to visit our website www.hauseit.com spelling is up here.
Go to resources, scroll down to calculators and the debt to income ratio calculator is
right there.
The other option is to type in directly into your search bar or your address bar www.hausite.com/debt-to-income-ratio-calculator,
the spelling is up above.
So, the calculator allows us to figure out two different things, one is the front end
debt to income ratio and the other is the back end debt to income ratio.
So, perhaps we can go over that very quickly.
If you scroll down to our glossary and FAQ section, we have the definitions right here.
So, the front end debt to income ratio is the percentage of pre-tax gross monthly income
which covers housing expenses.
Now this includes your mortgage payment property taxes if you own a condo it would include
your common charges, if you own a co-op it would be your monthly maintenance payment
to the building.
This would also include homeowners insurance.
Now the front end debt to income ratio only includes housing related expenses.
So, if you owned a Porsche or if you had a Toyota Camry or whatever it might be and you
had at least payment for that the front-end debt to income ratio does not factor in that
monthly liability that you have to pay for your car or for student loans or if you have
and maintain credit card balances.
Now the back end that income ratio is everything the front end ratio is but we also add in
those other liabilities that we just mentioned student loan payments, car payments, anything
that you have to constantly pay every month that will also appear on your credit report.
So, if we go up to the calculator here you could actually input all of the required items
to figure out your front and back end DTI.
The most important item is your income and keep in mind as we've mentioned this is your
total pre-tax income.
It should include everything that would be on a tax return wages, dividend income, rental
income and stipends.
Now two ways to do it if you prefer to think about your income as an annual figure you
can put that in directly or if you think more about things on a monthly basis you can toggle
between annual and monthly as far as your income is concerned.
Now here in housing expenses you have that same option you can think about everything
in an annual basis or on a monthly basis and the things we need to know would be your mortgage
payment, your common charges in case of a condo, we need to know your property taxes
if you own a condo or a house, keep in mind a co-op there would not be anything in this
field.
And if you own a co-op you would fill in the maintenance fees and remember that a co-op
pays property taxes directly on behalf of unit owners.
So, if you own a condo you have two things to pay every month.
You have to pay your common charges and you have to pay property taxes.
With a co-op you just pay your co-op maintenance, of course, in neither case you would also
pay your mortgage if you are financing.
The other things that are included in front-end DTI are your homeowners insurance payment
as well as any private mortgage insurance that you may have.
Other expenses would include but are not limited to student loan payments, credit card payments,
car lease or other loan payments, as well as any other mandatory payments you're on
the hook for.
For the purposes of this example, let's go ahead and put in $500 for a car loan payment.
Now, as we can see on the top right we have two calculations we have the front-end DTI
and back-end DTI the backend debt to income ratio is always going to be slightly higher,
assuming that you have other non-housing related liabilities that you have to pay on a monthly
basis.
So, if for example, you decide to get rid of the car you don't want it anymore and you
pay off your credit card.
We put zero for both of these fields and you'll see that the front and back end DTI are now
the same but the back end can never be lower than the front end.
So, if we add credit card payments let's say you pay seven hundred a month you got a hefty
balance your back end ratio is gonna start to creep up and be higher than the front end.
Most mortgage lenders will underwrite up to approximately 43% as far as a debt to income
ratio is concerned.
Co-ops typically are looking for 25 to 30% in some cases low 30% will be okay, really
depends on the building and you're going to want to have your buyer's agent check in with
management and the listing agent to try to get a read on what sort of requirements financially
speaking the coop may have.
Some coops don't actually disclose what the requirements are and other coops are very
explicit in terms of what they require and in some cases also how to calculate things
such as post closing liquidity what sort of assets would count for that.
But we have a whole bunch of videos on the Hauseit YouTube channel which talked about
everything you need to know for buying a co-op including financial requirements as well as
the board package.
So ,please check us out if you haven't already or visit our website www.hauseit.com.
So the calculator is pretty straight forward, we hope you find it helpful you can also do
two things with it.
You can send yourself an email which will be great because you can forward it to family
your friends or anyone you're deliberating with maybe even to your lender as necessary
and you can also print out a PDF so this would be great if you want to save it down email
it to anyone or just have it on file for your records.
Thanks again for watching.
I'm Nick at Hauseit, if you have any questions please leave us a comment below.
If you liked the video hit like, subscribe to our channel, we'd greatly appreciate it.
You can also send us an email to team@hauseit.com and of course if you would like to save money
when selling or buying your city check out our website www.hauseit.com, number of ways
you can save money.
So, that's all for today's video thanks again for watching, we hope to see you on the next
one!