It's actually pretty easy. You are allowed a certain percentage of your GROSS monthly salary for debt service and housing. According to Fannie Mae and Freddic Mac, who control A paper, it's essentially 45%. Some subprime lenders will go to 60 percent, but let's stay A paper until we know you don't qualify.
Take 45 percent of your gross monthly income, call it X. From X, subtract your current debt service. This is car payments, credit card payments, furniture payments, any actual debt you have.
The number that is left over, call it Y, is what you can afford for housing by traditional measures. It needs to cover principal and interest of the loan, property taxes, homeowner's insurance, and association dues (if any), PUD fees (if any), and Mello-Roos (if any).
Assuming that there are none of the last three, you're left with PITI, the acronym you're going to hear about what this covers: Principal and Interest (on the loan), Taxes (property) and Insurance (homeowner's)
Right now, there are thirty year fixed rate loans in the low sixes with 1 total point or less. Any loan calculator (except auto loans) can handle $145,000 at 6.25% The answer is $892.79 (round up to the next penny!). Except that if you're not putting a down payment, you're going to want to split your loan into a first and a second to avoid PMI. 80% is $116,000 at 6.25% That's $714.24. Add the remaining $29000 back in at 9.00% (doing this saves you about two and a quarter percent on the whole amount) adds $233.34 to the $714.24 for a total of $947.58. This assumes you've got decent credit, by the way.
I have no way of knowing your property taxes. Call your county assessor's office. for that information.
I have no real way of knowing what homeowner's insurance might be. I usually guess $100 per month for a good poilcy, but that's a guess, and it could be more or less. Ask an insurance agent.
If this $892.79 (with 20% down, or $947.28 with zero down) plus property taxes, plus homeowner's insurance, is less than Y, you've got an excellent chance of qualifying for that loan.I'm clueless about how home loans work. Is there any way to figure out how much I can afford to spend per mont
the easiest way to ballpark your payment is to figure it at 1% of the loan, in this case 145000 would be around 1450 month including tx and insurance. this is only a ballpark figure. go talk to a realtor and/or a loan officer and get a preapproval and have your particular situation analyzed. thewre is no ready answer to what you can afford as none of us know what your credit or debt load is. i can refer you to a qualified realtor. email me at droemer05@yahoo.com ineed only to know what city and state you live in.
Hello -
May I suggest the following website, which will give you FREE access to some cool calculators
http://www.freemortgageinformationsouthe鈥?/a>
You can find out how much home you can afford on your current income. They have another that tells you how much income you need to qualify for your dream home.
The last handy calculator determines if it's better for you to rent or buy your new home.
If you get lost in the legal-ese that always seems to accompany financial transactions? Well, we're here to help you decipher the language. Simply click on the link below to see the definitions in lay mens terms.
http://www.freemortgageinformationsouthe鈥?/a>
If you have any further questions, please just send me an email.
Kindest Regards,
Darren Meade
A number of questions immediately arise.
- What down payment can you make? Subtract that from your target price to see how much you need to borrow.
- What kind of loan do you want? The old days of 30-year fixed rate amortizing mortgages are dead and gone; the number of available loan products is mind-boggling. Go to www.mlcc.com (Merrill Lynch's home finance subsidiary) to get a taste of what is available.
- Get yourself a financial calculator. I have an HP-12C, which has been the standard of the industry for years. You can use it to calculate payments, amortization times, and all sorts of other things that pertain.
- If you still feel snowed under, I recommend Ayres, Mathematics of Finance {Schaum] for details on this and many other subjects, including life insurance.
- Go talk to your banker, once you have looked at this stuff and have some idea of the questions you want to ask.
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