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Originally Posted by Yakk
If I know what kind of rates I can get, is there an easy calculation (debt-load? percent of income going to pay interest?) that can tell me round-about (just a rule of thumb) how much credit I can get?
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Most banks will not let you go over 40% debt-to-income. Here is the "quick and dirty" way to figure DTI:
Add up your monthly expenses and divide by your monthly gross income.
It should be noted that if you have revolving credit lines, you cannot just figure your monthly payment. The bank will figure what your maximum payment
could be because you could max the line out at any time. Most banks takes your maximum credit line amount and figures 2% of that, I've seen some banks figure as high as 5%. So your maximum payment on $2,000 using the 2% rule would be $40.
Also, the bank does not figure in things such as child care, groceries, gas, or utilities. Here is an example of a typical household:
Monthly Gross Income: 2500
Mortgage: $900
Student Loan: $50
Vehicle #1: $200
Vehicle #2: $350
Visa: $40 (credit limit of $2,000 - take 2%)
Retail Credit Card (such as Home depot): $25 (again, take 2% of total credit line)
Total: $1,565
Divided by $2,500: 62.6%
Also, if you are refinancing the vehicles, then you wouldn't include those in the monthly expenses because you would be paying those off with the new loan.
Hope that was clear!