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Do i include monthly phone, utilities (est.), and food expense when calculating my debt/income oblig

I'm trying to determine how much home I can afford.  Do I include all these monthly expenses (food, utilities, etc.) or just long-term debt obligations?
  • August 05 2010 - Sunnyvale
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Answers (4)

Best Answer

Debt to Income is credit card debts, car loan, home mortgage, property tax and home insurance. The expenses as food, utilities, etc... are not counted in Debt to Income. 

  • August 05 2010
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Hi Kris,
Thanks for pick my post as the best answer.
  • August 05 2010
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The lender's risk analysis must include all liabilities affecting income or assets that will affect he borrowers ability to fulfill the mortgage payment obligation.  There are two ratios lenders look at in determining your perceived ability to repay your mortgage loan.

The first is your "front-end ratio."  This consists of your house payment including principal, interest, taxes, insurance and HOA dues.

The next is your "back-end ratio" which consists of the front end ratio in addition to all your monthly debt obligations such as credit cards, auto loans, student loans, other installment loans, child support, alimony, etc.

The back-end ratio does not include utility bills, child care expense or other "living" expenses unless you are obtaining a VA loan.

For FHA financing the ratios are limited to 31/43 and conventional loans are limited to 36/45, but both can be expanded by Desktop Underwriting.
  • August 05 2010
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Kris n Carl,
Great question.  A lender won't use those items in your debt to income ratios, unless you are applying for a VA loan.  For veterans, the lender will calculate a variety of things that include utilities, etc.  On a personal note, I always suggest that people consider these things when putting together their own budgets.  So, even though a lender won't consider these items, you should.
  • August 05 2010
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