Here is a simple schedule of the payments that a conforming bank says that you
can afford when they look at your income. This schedule is based on the gross
income, not what you bring home. These numbers are not as scary as they
sound, in fact the following schedule makes it easy to see where you and you
paycheck actually fit in.
If you are looking for a general idea of what kind of payment you can afford
and what size mortgage that will get you, this schedule gives you that, a general
idea. Please talk to myself or another mortgae professional to consider your
entire financial picture before making a decision to buy a home.
Rather than just giving you percentages, you can follow down the chart to compare
what you make versus the payment you can afford and the total monthly payments
you have on the mortgage plus you car payment and any credit card bills.
Although a bank will consider a number of factors when considering whether to
give you a loan, the most important thing they look at is whether you have the
ability to fulfill your obligation to them. This is a function of your income
and debt levels. In order to help make that decision, the banks have come up
with two ratios called the "housing ratio" and the "debt ratio."
Housing Ratio
Conforming Lenders want to see your monthly housing expense as 28% or less of
your monthly gross income. This includes your principle and interest of your
mortgage plus taxes and house insurance. Hence the term PITI.
Debt Ratio
The banks want to see this number at or below 36% of your monthly income and
includes everything in the housing ratio plus your other obligations. These
can be credit card payments, car loans and child support.
Payment Chart
As you look at this chart, remember that you should fit into both categories
to afford that home.
In addition, remember that the housing costs column is your total mortgage payment.
This includes the principle and interest on your mortgage, and any taxes, insurance
and PMI.
The size of mortgage column gives you an idea of the size of the mortgage you
may qualify for assuming that taxes, insurance and PMI are approximately 25%
of the mortgage payment and an interest rate of 6.5%. There are many factors
that go into the size of the mortgage, but this will give you a genereal idea.
|
Gross
Monthly Income |
Housing
Costs Allowed |
Total
Debt Allowed |
Size
of Mortgage |
|
2,000 |
560 |
720 |
$66,000 |
|
2,500 |
700 |
900 |
$83,000 |
|
3,000 |
840 |
1080 |
$99,000 |
|
3,500 |
980 |
1260 |
$116,000 |
|
4,000 |
1120 |
1440 |
$133,000 |
|
4,500 |
1260 |
1620 |
$149,000 |
|
5,000 |
1400 |
1800 |
$166,000 |
|
5,500 |
1540 |
1980 |
$182,000 |
|
6,000 |
1660 |
2160 |
$197,000 |
|
6,500 |
1800 |
2340 |
$213,000 |
|
7,000 |
1940 |
2520 |
$230,000 |
|
7,500 |
2080 |
2700 |
$247,000 |
|
8,000 |
2220 |
2880 |
$263,000 |
|
8,500 |
2360 |
3060 |
$280,000 |
|
9,000 |
2500 |
3240 |
$296,000 |
Don't
Fit?
There are other ways to qualify for that home you really want, but remember
that any time you step outside of the above guidelines, you will pay the bank
for stretching the limits, either in points and/or interest rate.
I have programs available that allow you to extend that ratio up to 50% of
your monthly income and while I do not suggest that you buy any home that
stretched you so far, there are situations where you cannot prove some of
your income that make these programs attractive to certain borrowers.
These numbers are only a general guideline to help you get an idea of what
tha bank considers when making the decision on granting a mortgage amd I strongly
suggest you speak with me or another mortgage professional before using these
numbers to make a decision on buying a home.
However, since there are a lot of options and programs that are available,
give me a call or
fill out the information
request form and I will be happy to discuss your options with you. |
