How Much Can You Afford?

By
Mortgage and Lending with Cherry Creek Mortgage

 

The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Two income-to-debt ratios established by Fannie Mae are standard requirements for conventional mortgages. The first requirement is that monthly mortgage principal and interest payments (P&I), plus insurance and property taxes, cannot exceed 28% of the buyer's gross monthly income (some exceptions may apply to increase this limit to 33%). The second requirement limits total monthly debt payments (housing, credit cards, car payments, etc.) to 36% of gross monthly income. In addition to these requirements, you may have to pay 10% to 20% down on the total purchase price to qualify for a conventional mortgage.

Mortgage Rates and Minimum Incomes Needed to Qualify
Interest RateMonthly PaymentMinimum Annual Income
4%$454$21,770
5%$510$24,479
6%$570$27,340
7%$632$30,338
8%$697$33,460
9%$764$36,691
10%$834$40,017
11%$905$43,426
12%$977$46,905

Mortgage companies use ratios to analyze your mortgage payment. The above example shows the monthly payments of principal and interest, and income needed to qualify for a $95,000 mortgage at various interest rates, amortized on a 30-year schedule, assuming a payment ratio of 25%.

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Rainer
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Sherry Connor
Myers Park Mortgage - Charlotte, NC

Nice Blog Rick! 

 

Mar 16, 2008 12:34 PM #1
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Rick Kellow

FHA & Reverse Mortgage Expert
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