How Much Home Can I Afford ?
How Much Home Can I Afford – Ounce you’re ready to look for a property, before you know it you can easily fall head-over-heels with your dream house. Watch your next step. You really need to know how much a lender will approve you for.
Routinely we Lenders talk about DTI Debt to Income Ratio as a qualifying method. These ratios can seem a very mysterious calculation. Fortunately we have a couple simple calculations which will give you an estimate of the loan amount you can qualify for. Even though many people rely on these ratios it’s best to call us for a Pre-Approval. With the pre-approval your information is run through an Automated Underwriting system. As long as your information doesn’t change this underwriting is extremely accurate.
If you want a rough idea of what you qualify for grab paper and pencil or use our online calculator.
1) Start with your monthly gross income (gross is before taxes).
2) Multiply this amount by 0.36. This is your maximum monthly housing expense. Meaning 36% of your gross monthly income can be used for the monthly mortgage payment. This number would have to cover the principal & interest, monthly property tax and monthly insurance.
3) Now multiply your monthly gross income by 0.40. This figure must cover the entire mortgage payment PITI and your monthly consumer debt.
4) Next total up all of your monthly consumer debt including child support, auto loans, credit cards, student loans with payments and other payments that can’t be completely paid off in 10 months. Consumer debt is credit cards and installment debt. Things like car insurance, utilities and gas do not count. Do not count installment debt with 10 of less remaining payments.
5) Now add up all your monthly consumer debt etc. and your PITI monthly Mortgage Payment. This figure should not exceed 40% of your gross monthly income.
6) Lastly to know your Top ratio, take the PITI payment and divide it by your monthly gross income. For your bottom ration take the number you compiled in Step 4 and add it to your PITI. Take this number and divide it by your monthly gross income. This is your bottom ratio.
Now that you know how to calculate ratios, be advised depending on your total situation you could be approved for a higher or lower loan amount.
How Much Home Can I Afford
Call us today at 424 225 2167 for help. One of our mortgage professionals will help you get best the best possible loan solution for your situation. We’ll be with you every step of the process and not hand you off to someone else.