Hello Everyone,
Determining how much of a mortgage you can afford will get you off to a great start as you begin your home search. I found this guide to help you calculate your estimated mortgage. As an Accredited Buyer’s Representative (ABR®), I am here to help you get the home you are looking for. I have many great resources, so please let me know if you have any questions. I look forward to working with you!
It's easy to be tempted by homes that you can't afford, but your home loan amount will be based on your lender's review of your mortgage application. Here are a few things to consider when estimating "how much mortgage can I afford."
Establish monthly gross income (before deductions) for each borrower. If you are not paid monthly, divide your annual salary by 12 for an estimate. Add the annual incomes along with other income you want to include such as retirement or investment income. The chart below explains how to estimate various types of income.
Next, estimate your monthly expenses. Make a list of monthly expenses including student loans, credit card bills, vehicle loans and obligations such as family support payments. You'll also want to include estimates for property taxes and hazard insurance for your new home.
Income to Expense Ratios
Mortgage lenders use two qualifying ratios as part of the loan approval process. The first is a ratio of estimated monthly housing expenses (principal, interest, property taxes, HOA dues and insurance) divided by your monthly gross income. Mortgage lenders prefer that it not exceed 28-32 percent of your gross monthly income. This means if you earn $7,500 per month, you could safely buy a home costing about $2,100 per month according to this formula.
The more important calculation is called the debt-to-income (DTI) ratio, bottom ratio or back end ratio. It's your monthly housing costs PLUS other the other monthly bills you listed, divided by your gross income.
So when making a purchase give me a call I can also help you with the pre approval process. Tim Garton Vallejo Ca Remax 707-315-5555 WWW.PROPERTYINVALLEJO.COM
Monthly Income and Expenses
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