NYC Debt-to-Income Ratio Calculator
Use our debt-to-income calculator that considers your annual and monthly income and expenses to determine your debt-to-income ratio (DTI) – one of the qualifying factors by lenders to determine your eligibility for a mortgage loan. Your DTI ratio is also essential for being approved by a co-op or condo in New York City.
ELIKA New York: Real Estate Calculators
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What is the Debt-to-Income Ratio (DTI)?
The debt-to-income ratio, expressed as a percentage, is one of the most critical numbers banks, condos, and co-ops examine when deciding how large a mortgage loan to extend to you or whether you should be building approved. As the number increases, banks’ credit risk assessment also rises. Thus, it is seemingly a straightforward calculation. But, it is decidedly more complicated, particularly in New York City. Use our debt-to-income calculator to understand your housing budget and your chances of being approved by a co-op or condo.
What is the Mortgage Debt-to-Income Ratio?
Lenders break down the debt-to-income ratio further into front-end and back-end ratios. Typically, the debt ratio uses your monthly debt payments and income. Therefore, the denominator is your monthly income. The bank calculates the debt ratios based on your gross monthly income or before your employer takes out any payroll or other deductions. It also includes other income, such as interest.
The numerator depends on whether you are calculating the front-end or back-end ratio. A bank’s front-end ratio adds to your housing expenses. This includes your monthly mortgage payment, property taxes, homeowner’s insurance, and maintenance fees/common charges. The back-end ratio is more extensive. This is everything the front-end ratio includes, plus your other monthly debt. So, monthly payments for student loans, car loans, credit cards, and alimony are added. Payments for utilities, food, and healthcare are not part of the calculation.
Our mortgage calculator can determine your mortgage payment, including principal, interest, taxes, and PMI insurance. Generally, homeowner’s insurance is $1,000 to $2,000 yearly, and you can figure out the property taxes. You can do the same thing for maintenance fees or common charges. However, while you and your lenders know your existing debt payments, this is not the case for your housing expenses, which are estimated.
Many New York City lenders are looking for a back-end ratio that does not exceed 43%, although traditionally, 36%. This allows you to qualify for a conforming mortgage. Early in the home buying process, asking various lenders about their requirements would be best. If your ratio exceeds what lenders allow, you may need to rethink your housing budget. You can also lower your ratio, such as repaying debt. It is advisable to formulate a budget to help you achieve your goal.
However, co-op boards may require a lower ratio in New York City. They will not approve your application in some instances if your debt-to-income ratio is greater than 25% to 30%. —the more conservative approach geared to protecting the building’s financial interests. Condo boards are less stringent than both.
A Mortgage lender
After you have done your calculation, it is advisable to work with a lender. They can pre-approve your loan, which also helps support your bid. Remember, this is the maximum amount you can borrow, but you need to feel comfortable with your mortgage loan. Also, your buyer’s agent can tell you what a building’s co-op board acceptable debt to income is to ensure you are within the range.