If you’re a regular Savings Corner reader, first of all, thank you! Secondly, you may notice something new. Each month, I’m going to spotlight a different mortgage topic. Read on for our first mortgage minute.

Everyone knows credit score is important when applying for a mortgage, but lenders also consider your debt to income ratio to determine how much you can borrow and at what interest rate. Monthly obligations such as credit card payments, auto loans, child support and rent or mortgage payments are used to determine your debt to income ratio, or DTI. To figure out your DTI, simply add up all of your regular monthly housing and debt payments, and divide that number by your total gross monthly income. The resulting percentage is your debt to income ratio. Expenses like groceries, utilities, gas and your taxes are generally not included in this calculation. So, let’s say all of your monthly bills add up to $2,000 per month and your gross monthly income is $6,000. Then your debt to income ratio is 33%. This falls into the range that most lenders will approve. It’s a good rule of thumb to keep your DTI at 40% or below.

As always, don’t be afraid to call your friends at Coosa Valley Credit Union anytime you have questions, we’re here to help!