Buying a home is a big milestone—and before you start the process, it’s important to understand what your financial responsibilities may look like. Taking time to review your income, current debts, and future home expenses can help you feel confident about what you can comfortably afford.
Understanding Your PITI
When a lender reviews your loan application, their main goal is to ensure you are a low-risk borrower who can manage the monthly payment for the life of the loan. To do this, they calculate your monthly PITI, which includes:
While every lender and loan program is different, a common guideline is that your monthly PITI should fall between 28–35% of your gross (pre-tax) monthly income. This is known as your front-end debt-to-income ratio.
Considering Your Other Debt Obligations
In addition to housing costs, lenders will also look at any recurring debts you’re responsible for each month, such as:
To calculate your back-end debt-to-income ratio, lenders add your monthly PITI to your other monthly debt payments and divide that total by your gross monthly income. Most lenders look for a back-end ratio between 35–45%, although this can vary depending on the lender and your overall financial profile.
Don’t Forget Everyday Expenses
Some expenses won’t factor directly into a lender’s calculations—but they still matter for your personal comfort and budgeting. Before applying for a mortgage, it’s a good idea to review your regular spending, such as:
No budget is perfect, but identifying areas where you can trim spending—even slightly—can make a big difference. While your lender may not see these expenses, reducing them can help you feel more at ease managing your monthly housing payment and other financial obligations.
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