Making a loan decision: 4 steps

This is the number most people start with. But the monthly payment alone doesn't tell you the total cost of borrowing -- for that you need the amortization schedule.

The amortization table shows you exactly how much of each payment goes to interest vs. principal, and how the split shifts over the life of the loan. Most people are surprised by how much goes to interest in the early years.

Before taking on new debt, it's worth confirming you have enough cushion. Your savings rate (savings as a percentage of take-home income) is the standard benchmark for financial health -- generally 20%+ is considered strong.

Lenders use DTI to decide whether to approve you. Most lenders prefer a DTI below 36%, and many won't approve above 43%. Running this before you apply gives you a realistic picture of what you'll qualify for.