How much house can I afford - According to the lender?
September 15, 2008 · Print This Article
LuckyOne asked:
My husband and I make $70,000 before tax per year and our total monthly bills (cars, credit cards, student loans, insurance etc.) are about $1300/month. I think we can afford an $1,100/month mortgage payment - about $168,000 home - but what will the lender say? Our credit is rated in the middle - about 620 average score.
Caffeinated Content for WordPress
My husband and I make $70,000 before tax per year and our total monthly bills (cars, credit cards, student loans, insurance etc.) are about $1300/month. I think we can afford an $1,100/month mortgage payment - about $168,000 home - but what will the lender say? Our credit is rated in the middle - about 620 average score.
Caffeinated Content for WordPress
Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
You should be ok. Banks consider that the mortgage should not cost more than about 35% of you total earnings.
I don’t know ask the lending tree.
Here’s Bank of Ameica’s template. They’re probably all about the same.
Happy house hunting.
-MM
Sorry to disappoint you. Pay down your credit cards and increase your credit score. Your credit score SUCKS. You should have no more then 3 outstanding loans that have been paid on time. Go to a mortgage broker and ask about FHA loans of maybe a State funded loan for first time buyers. Many state offer programs for 1st time buyers and low income families. You may also consider a 2 or 3 family house. The tenants will basically pay the mortgage. The bank will also use 75% of the rents to add to your income thereby allowing you to purchase a more expensive home. The bank will use a debt to income ratio and a housing expense to income ratio to determine what you qualify for. Usually 1st time buyer programs offered by the FHA will allow for a greater income to debt ratio. Talk to your mortgage broker. Also, mortgage brokers can pull your credit up to 3 times within a short period before it starts to effect your score. So don’t have them run credit report to often.
Do not listen to all the people that are above me. I am a mortgage consultant and you two are doing fine. And your credit does not SUCK, it could always be better but it is fine to purchase a new home. The absolute highest you want to be at for your debt to income is 50% you really want to be under that though so you can save money for retirement, that includes mortgage payment/ taxes/home owners insurance/ and other loans and credit cards on your credit report. With your scores you may qualify for 100% financing but it is always better to put down as much as you can to get a better rate. I think the two of you will be just fine. Good Luck on finding the perfect house..
The debt to income ratios are quite simple to figure out. What lenders, brokers and underwriters do is take the total amount of monthly debt on installment accounts that have more than 10 payments left on them, things like cars, credit cards, student loans, along with what your estimated payments would be (on a purchase of 168K and a FICO of 620 you are looking at about 8.5 interest rate) along with your monthly taxes and insurance. Then divide that sum by your income. So say your revolving debt is 900 a month and your PITI (payments, Interest, taxes and insurance) comes out to 1591.77. Then the formula would be 2591.77 divided by 5833.00 equals .43573. So your DTI is 44% Lenders try to keep you between 40-50 %. In your case, you should be fine.
if you need advice i know someone who can help ask Daryl about a mortgage she is a great person you can find her number at