Any individual won’t feel as comfortable as they feel at home. American Mortgage Corporation has been working with you to keep roof above your head with excellent efficiency and reputation. There are many options available to help you make your mortgage payments more affordable or to avoid foreclosure. One must know the fact that neither Freddie Mac nor your bank wants your home – They want to work with you and keep you in your home.

Now that the mortgage rates are all time low since 1971, how can you take advantage of the situation when you are in high debt?

According to Investopedia, the debt-to-income ratio is a personal finance measure that compares the amount of money that one earns to the amount of money that they owe to their creditors. For majority of the people, this number comes into play when they are trying to line up the financing to purchase a home, as it is used to determine mortgage affordability.

Calculating Debt-to-Income

Calculating debt-to-income ratio isn't hard and it doesn't cost a dime. There are two main ways to calculate this depending on the debts included in the calculation.

The less strenuous way to measure this ratio is to compare all housing debts, which includes your mortgage expense, home insurance, taxes and any other housing-related expenses. Once the debtor has the total housing expense calculated, divide it by the amount of your gross monthly income.

The more encompassing measure is to include the total amount of money that one spends each month servicing debt. This includes all recurring debt, such as mortgages, car loans, child support payments and credit card payments.

Do not include monthly expenses such as food, entertainment and utilities.

Gross Versus Net Income

For lending purposes, the debt-to-income calculation is always based on gross income. Gross income is a before-tax calculation. One does not get taxed, so they don't get to keep all of gross income (in most cases). Because one can't spend money that they never received, the result is a somewhat aggressive picture of your spending ability.

Despite the original debt-to-income calculation, one can't pay their bills with gross income, and the net income (take-home pay) is less than the number used in the calculation. That's nearly the amount that was used to help determine their spending ability but that won't actually be there to work with when it comes time to pay your bills and manage other necessary expenses.

Good and Bad Numbers

The debt-to-income ratio tells a lot about the state of the individual’s financial health. Lower numbers are indicative of a better scenario because less debt is generally viewed as a good thing. After all, if they don’t have debts to service, they will have more money for the mortgage loan. Unfortunately, a high debt-to-income ratio often means that there aren't many extra dollars left at the end of the month.

So, what is a good ratio? We generally prefer a 36% debt-to-income ratio, with no more than 28% of that debt dedicated toward servicing the mortgage on the individual’s house. A debt-to-income ratio of 37-40% is often viewed as an upper limit.

Despite of the fact, there are companies willing to issue a loan. But the individual needs to think twice before accepting it.

For more information, visit us at http://www.americanmortgagecorporation.com