How much house could they afford to buy? (estimate)?
January 20, 2007 · Print This Article
Jokey Smurf asked:
Let’s just say….
Combined monthly gross $6,704.00
30 year term @ 6.5% average interest rate
(0 to $10,000 down)
Excellent credit scrore
Let’s just say….
Combined monthly gross $6,704.00
30 year term @ 6.5% average interest rate
(0 to $10,000 down)
Excellent credit scrore
Also….what % is expected to put as a down payment?
(not looking at other expenses right now)
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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.
There are so many home ownership programs out there that your head will spin. I worked for a large lender that offered over 250 real estate loans for various different scenarios. They vary from no money down and paid closing costs to community second mortgages.
My suggestion would be to find a REPUTABLE lender and get some references. Second, I would look to a Housing coalition or CCCS office that could answer some of the tougher questions.
Long story short, if your credit is good, you could more than likely qualify for any loan that you would like. Reality however; look at what you are spending now for a monthly payment on housing and how far do you want to stretch it. YOU have to be comfortable with your payments.
Once you have that number, back into the principal & interest payment after deducting Homeowners insurance, taxes and possibly PMI (Private Mortgage Insurance). Finally, go to a banks website that does NOT require to fill out a loan application and look for a mortgage calculator.
Too much to consider to really legitimately answer that questions here.
Well with the basic info you provided here goes:
at 6.5% with that income and no other expenses they are at a 42.427% DTI ratio on a $450,000 house.
Being that you should at least take into account taxes and insurance and potentially mortgage insurance if they are going to get 100% financing and I’d say the safe area would be in the $400,000 range.
If you want to do some basic calculations you can use this calculator:
About $240K with a down pmt of $12,000 or 5% (using a conservative back end ratio of 38%). (This estimate DOES take into account taxes and insurance, not PMI however. Taxes at 1.25% and Insurance at .35%). Let me know if I can be of any more help.
Most lenders like to see no more than 45% of your income going to your housing cost and some go to 50%-55%. With that figure in what can you afford, $2,680 or $3,685.
Let’s use the lower one, $2,680, as a monthly payment for a loan of 80% of the value of the property without taxes and insurance. Both can be added to the loan monthly but again for this exercise I’ll keep it simple.
Interest rate 6.5%
Loan program 30 yr fixed paying principle and interest
Payment $2,680
Loan amount is $424,005
I wouldn’t go over $417,000 because that is the conforming loan amount, a loan backed by the federal government and not resold to Wall Street.
Same information as above but using an interest only payment your loan amount for 80% could be $495,000.
There are many programs for down payment assistance - ask your local lender who you trust. You might need to interview a few.
What is your debt to income ratio? Other expenses matter!
You’re question at its core is simple, 45% of your Income after required paymets (cars, etc). The less you put down, the more likely you will have to pay a fee for this (different terms).
As always I recommend not dealing with a mortagage broker, or dealer. Go directly to a bank like Washington Mutual, Citibank, a credit union, etc. Those places will give you a conforming loan (you want a conforming loan). Those lenders can help you with a 0 down loan or a 10 or even 20% loan.
Using my own means of guessing: reduce your income after taxes and insurance by credit cards payments, finance payments, and car payments. Cut that income by 50%-40% and that’s your monthly is (don’t forget taxes). Or take that figure and multiply it by 100 and that’s a ball park of the cost of the home you can safely afford. The bank using DTI can probably loan you more, but using this simply quick method you can keep your eyes on something realistic and affordable.
Remember there is a difference between what you can borrow and what you can afford. My figures are based on affordablity and setting realistic goals.
your mortgage as a rule of thumb say is 1/3 of your monthly income. Put down as much as you can less payment, do a 15 year mortgage if you can. a little higher but less interest. If you need to put down the minimum 20% of the asking price.
I don’t get it, are you saying your income is $6,704?
Years ago they wouldn’t even look at you unless you brought in minimum of $35,000 and I suspect it’s a lot more than that now.
When we bought our house for $22,900 several years ago (it was a fixer uper), our income was $26,000 combined.
So now that homes are minimum $100,000…then I would say you and your significant other would have to earn $100,000 total income between the both of you to be able to own the home comfortably. If you don’t, then don’t even try to buy one.