Much of your financial life is changing as you transition from a steady paycheck to a mix of fixed and variable income and a new lifestyle. So adding a large debt to the picture isn’t an easy call. That’s especially true now that mortgage rates hover around 7% and home prices keep rising. “Any time you take on debt, you increase risk in your situation,” said Illinois-based certified financial planner Jim Stork.
The debt portion is composed of your expected mortgage payment plus any credit card, student loan, car loan or other outstanding debt you may have. Generally speaking, for conventional loans your DTI ratio can be up to 50%, Cohen said. That ratio falls to between 43% and 45% if you’re taking out a jumbo loan, she added. A jumbo loan exceeds the conforming loan limits in the area you want to buy.