About The Homebuying Process » Step 1: Why Get Pre-qualified? » Step 6: Application Prep Kit » Step 2: Housing and Debt Ratio Worksheet » Step 7: Start Shopping! » Step 3: Consider the Up-Front Costs » Step 8: The Closing Process » Step 4: Comparing Rates and Costs » Glossary of Terms » Step 5: Choosing a Mortgage

Housing and Debt Ratio Worksheet

To determine the monthly mortgage payment amount you qualify for, complete a Housing and Debt Ratio Worksheet. Some of the documents below are presented in Adobe Acrobat format. If you do not have the ability to view documents in Adobe Acrobat, download it now for free.

Housing and Debt Ratio Glossary

The definitions below will help you complete the worksheet.

Gross Monthly Income:
This is your total income from acceptable sources, before taxes, insurance and other deductions are made. After deductions, the income is referred to as take-home pay or net income.

Net Income:
This is your take-home pay, the amount you receive in your check after taxes and other deductions are taken from your gross income.

Monthly Installment Debt:
Borrowed money that is repaid in several consecutive payments, usually at regular intervals, for a specific amount and for a specified term, such as car payments for 60 months.

Revolving Credit:
Open lines of credit that are subject to variable payments in accordance with the balance. Credit cards are a good example of revolving credit.

Housing Debt Ratio:
This ratio determines the amount of gross monthly income that can be applied to principal, interest, taxes and insurance.

Total Debt Ratio:
This ratio determines the amount of gross monthly income that can be applied to all monthly debts, including housing. This amount includes things like car payments, finance company bills, credit card payments and any debt that has more than 10 payments left.

PITI:
An acronym for the items included in a monthly mortgage payment: principal, interest, taxes and hazard insurance (may also include mortgage insurance or flood insurance, if applicable). The amount you pay each month for taxes and insurance is usually put into what is called an escrow account; it’s held there until the money is needed to pay your insurance and tax bills.