The typical homebuyer has been browsing through properties online and driving around looking for yard signs. This is a great start since it is important to get an idea of what you are looking for, however, it is even more important to know how much you can afford to spend. Follow these steps to get a basic idea of what monthly mortgage payment will work for you:
- Allowable Monthly Debt Payments
Although it varies, many lenders typically prefer that your monthly debt and housing costs are less than 28% of your gross monthly income. Even if your debts are higher than 28% of your income, that doesn’t mean you can’t get a mortgage, there are financing programs that help make
homeownership a reality for people from various financial backgrounds.
$5,500 Gross Monthly Income*
x .28 Debt-to-income ratio
= $1,540 Allowable Monthly Debt Payment
*You and your spouse’s total income before taxes and other expenses
- Total Monthly Debt Expenses
Add together your regular monthly debt payments: car payments, student loans, required minimum credit card payment, and any others.
$300 Monthly Car Payment
+ $150 Monthly Tuition Payments
+ $90 Other Monthly Debt Payments
= $540 Total Monthly Debt Expenses
- Maximum Mortgage Payment
Subtract your monthly debt expenses from your allowable monthly debt payment in order to find your maximum mortgage payment.
$1,540 Allowable Monthly Debt Payment
– $540 Total Monthly Debt Expenses
= $1,000 Maximum Mortgage Payment
Keep in mind that your maximum mortgage payment should include mortgage insurance, homeowner’s insurance, and property taxes.
If you have questions or need help obtaining a mortgage, please don’t hesitate to contact one of our loan officers at Homesale Lending.