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To estimate your chances of getting a loan you need to look at two ratios, payment to gross income, and debt service to gross income. Determine the payment to gross income ratio by dividing the payment amount by your total gross income, then multiplying the result by 100. This will give you the percent of gross income that will be used to make the payment. Rule of thumb; less than 20%, you are in great shape, 20% to 30% still good, over 30%, may have problems getting a loan. Next, you need to check the total debt service to gross income ratio. To get it, add up all monthly payments to credit cards, bank loans, auto loans, etc. If selling a current home to buy a new one, substitute the new home payment amount for your current one. Divide this total by your total gross income and multiply the result by 100. Rule of thumb; less than 40%, you are in good shape, 40% to 45% you will probably have to work to find a good loan, over 45% probably want to look at low document or no document loans. These usually much have higher interest rates and upfront costs.
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