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How to Calculate How Much Rent You Can Afford
Evaluating the monthly expenses that you can incur when renting can help you prepare before signing a rental agreement. Being 100 percent positive about how much you can afford to pay for rent is helpful. You can learn how to calculate how much rent you can afford by applying some basic accounting formulas using your income and debts.
How to Calculate How Much Rent You Can Pay
The standard in the rental industry is usually to agree to approve a rental agreement for a renter who has a debt to income ratio of 36 percent or less. This is also the standard ratio that most mortgage companies use. Using a basic formula, you can determine how much you’re able to pay for rent.
1. Add up all income
2. Add up all debts
3. Divide debts by income
Calculate Your Gross Monthly Income
The money that you earn from employment or other taxable sources can be used to determine your gross monthly income. Some employers print out monthly pay information on paycheck stubs or can provide a letter if requested of earnings. Adding in all gross income before taxes can help you determine the true amount of money that you earn each month.
Add All Monthly Debts
No two people have the same debts that are paid each month. Some people pay more to receive cable or satellite television. Adding up every expense that you incur in a one-month period can be helpful in determining how much your lifestyle costs you. Expenses like car repairs that do not happen monthly do not have to be included in the calculation. Obtaining a realistic monthly picture of all of your debts will help you locate your eventual debt to income ratio.
Divide Debts by Monthly Income to Obtain DTI
This calculation can surprise you and usually is an eye-opener for most people. The success or failure when managing your monthly expenses is revealed when a DTI calculation. Divide your total amount of monthly debt by the income that you’ve calculated previously. This will produce a percentage that is the same calculation that property managers and landlords often use. A range of 20 to 36 is where most people end up when performing a DTI calculation.
A DTI above 36 could mean that you’re not ready to rent a high priced home. The percentage that you calculate will reveal exactly how much of your monthly income goes towards expenses. This rate does not include taxes at the federal, state or local level. The completion of performing this calculation can reveal a basic estimate of your ability to rent at a certain dollar figure each month.
Renting Jacksonville, Florida Homes
Homes for rent on this website each feature the monthly rental price and how to get started with an application. The search finder at the top of this page includes access to the more than 300 homes that are currently renting in and around Jacksonville. The chat support on this website or local number provided can help you find your next home to rent. Regardless of your DTI, a property specialist here can evaluate your ability to rent an available home.