Calculating debt to income ratio

[scorepower]

Hello, We are looking to get into a house in the next 9 months. Our income just went up and our credit score is in the low 700's. My goal is to get it above 720 when we apply. We have about $15,000 to use as a down payment. I'm wondering wheater we should invest heavily in paying down our debt or continue to save a little more to use as a down payment. I know 45% is a good range for DTI but wanted to see how you go about calculating this for both myself and wife. We live in California and price range is around $500,000 to 530,000. Anyhelp on this would be greatly appreciated.

[Anonymous]

Total debt divided by total income .

You will have 3 figures:  Your's, her's, and combined.  Work on adjusting all 3.

The 45% is to include your mortgage, CCs, and all loans.  Any loan with less than 10 months left on it is usually not (and shouldn't be) calculated into this.  With 10 months left it is 'short-term debt' - a mortgage lender is more concerned with the longer term.

the 15K would give you a -3% downpayment at your min price but no money for closing costs (not too much of a problem in this type of market) 

A $485,000, 30 year note at 6.5% will cost about $3065 per month not including insurance, PMI and taxes.

HTH

[Anonymous]

As I understand it, you back DTI is calculated as (Monthly obligations to debt payment)/(monthly gross income). This includes your PITI. The actual amount of debt is not included in the calculations. The monthly obligations on CC's are usually 2% of the balance.