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Many people want to own a home – if not for the pride and sense of satisfaction of having a place that is all your own, then for the investment. Buying a home is an important first step in building wealth, but mortgages continue to be something that causes people to have second thoughts. 

Owning a home can bring equity and tax breaks, but it requires more commitment and expenses than owning a home. If you know that you want to own a home, the best first step you can take is to decide what you can budget for. One of the best ways to do that is to figure your debt-to-income ratio. The total debt-to-income ratio should not be more than 26%, and your potential mortgage should not be more than 28% of pre-tax monthly income. 

Here is a simple way to factor your debt-to-income ratio at home:

  • Figure your total monthly gross income
  • Multiply the answer by 36%
  • Add up your total debt each month
  • Compare answers forms step two and three

The total monthly debt – including your mortgage – should not be above the number from step 2. Then you will want to add all of your monthly non-mortgage debt and subtract that from the monthly gross income. This will give you an approximate answer as to the maximum mortgage amount you can afford each month. It is important to note that you should also factor your unique financial situation into your decision-making process. 

If you want to invest but purchase property, hard money lenders in Florida may be a better option. 

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