To figure out where you stand on the debt-to-income ratio, you must first understand the meaning of the figure. Most lenders use the ratio 28/36.

The first number, which is also referred to as the front-end ratio, is the percentage of your gross monthly income that you could comfortably afford to spend on your housing payments or mortgage. This figure includes the money you spend on property taxes and insurance as well as the loan payment itself.

The second number, which can also be referred to as the back-end ratio, is the percentage of your gross monthly income that should be spent on all long-term monthly debts combined.

Use the following guidelines to find out where you stand:

- First, figure out your gross monthly income (your income before taxes). To do this, take your gross yearly income and divide it by 12.

- Multiply this figure by 28 percent (.28). The amount you come up with is TYPICALLY the amount you could comfortably afford to spend on your housing payments per month.

- Now, take your gross monthly income (your gross yearly income divided by 12) and multiply it by 36 percent (.36). The figure shown should be the TOTAL amount of money you spend on ALL LONG-TERM DEBTS COMBINED. To get a more accurate mortgage estimate, tally up your monthly bills – which include car payments, credit cards, child support, alimony, etc. – and subtract this amount from the figure you just came up with. However much money is left over is the amount you should truly be spending on your housing payments per month.

There is no doubt that the foreclosures market is a bargain haven. There are lots of foreclosed properties that can give you that one break that you need to make it in the real estate business. If you look hard enough, you can easily spot a great deal when you see one. The potential in investing in foreclosure houses for sale is just huge that more people are jumping into the bandwagon.

Cheap can also be expensive. You need to always keep in mind that the foreclosures market is the result of people being unable to pay their mortgages such that their lenders need to foreclose on their property to recover their money. When banks foreclose, they take back the property and attempt to sell these to willing buyers.

It is best to remember that home owners who have defaulted on their loans may have been in financial crisis for some time before the property was foreclosed. Hence, you cannot expect that they would have done any major or substantial repairs to their homes within the period immediately preceding the foreclosure. That is why banks sell them ‘as-is’ which means that you get them in the state that they are in regardless of the number of repairs that need to be done. To put it simply, when you buy a property, any repairs or renovation cost will be borne by you.

Make sure that there is a substantial difference between its appraised value and the cost of repairs. As soon as you have become interested in foreclosure houses for sale, try to find a way to inspect or tour them in order for you to get firsthand information on the actual condition of the property. This is especially useful for those who are first time buyers or are looking for a property in which to house his family. A high appraisal value means that your property is worth more than what you have invested in.

All in all, careful scrutiny of a transaction is very important when buying foreclosure houses for sale. The reason is simple: buying them should benefit you, not unduly burden you and your family. It is wise to exercise prudence and devise a strategy that would ensure a favorable outcome for you.