Looking to buy a house...?

Question

What's an easy way to make just a simple rough estimate of how much I can afford?

Answer 1

Take your income (before taxes), multiply by 43 percent for FHA/VA, multiply by 45 percent for conforming, and 50 percent for subprime. Take that amount, and subtract your monthly payments for auto, credit cards etc. Anything that is on your credit report and you are paying a monthly payment on. Now take the bottom figure (and that is what you can afford) Lenders like to see your DTI (debit to income ration) between these ratios. Sub-prime can be higher, but the 50 percent is a good estimate. You also have to take into consideration the property taxes and homeowners insurance on the property into the DTI ratio.

What are you paying now? What are you confortablt with.?

When you Decide to buy, decide on how much you want to spend, if you want to escrow the taxes and insurance. Say the taxes are 1200 a YR and insurance 800 a year (just an estimate, ok) That is 2,000 a year divided by 12 = 166.66 If you paid 1,000 a month now - (166.66) your P/I Principle and Interest would be 833.34. Now you decided on the price range you are looking into. If you have great credit, a 1 loan at 130,000 at a rate of 7 percent over a 30 year time would be 864.89 - This is just a estimate - ok - Just depends on your credit. You could get a lower interest rate or it could be higher - it is all based on credit. It is up the Lender what they offer you. That is why you need to use a mortgage broker.

Why? Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) FHA/VA approved too. If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home &/or refinancing, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.

By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out

Cost associated with your loan. You will need to pay for the appraisal up front (when it being done). You will need to pay for The Home Owners Insurance Coverage for 1 YEAR . The seller can help you with up to 6 percent of closing cost. So the title fee, lender fees, underwriting fees, flood cert, etc can be paid for by the seller. If the loan amount is high, than you do not need 6 percent (ok) but if you live where the home values are 60,000 - 100,000 than the 6 percent comes in handy so you have no out of pocket expenses, except for the appraisal (and sometimes the seller will pay for it, depends on how generious they are).

YOU CAN ALSO DO A FOR SALE BY OWNER - YOUR MORTGAGE BROKER WILL HELP YOU & THE SELLER FROM START TO FINISH, TO CLOSE YOUR LOAN. THE PERSON YOU ARE WORKING WITH, WILL ORDER TITLE, ANY SURVEY’S NEEDED, INSPECTIONS IF NEEDED, ORDER PAYOFFS ON SUBJECT PROPERTY IF THERE IS A MORTGAGE ON THE PROPERTY.

100,000 @ 6 rate 30 yr fixed = 599.55 P/I
150,000 @ 6 rate 30 yr fixed = 899.33 P/I
200,000 @ 6 rate 30 yr fixes = 1199.10 P/I

100,000 @ 7 rate 30 yr fixed = 665.30 P/I
150,000 @ 7 rate 30 yr fixed = 997.95 P/I
200,000 @ 7 rate 30 yr fixed = 1330.60 P/I

These are just estimates (ok) Like I mentioned it is all based on credit. There are also interest only, pay options where you pick a payment between 4 payment options) You have arms, I/O programs, where your payment is interest only for 30 years, or set for 5 years, than the paymeent switches the a fixed rate, 10 yr I/O, just depends on what you are looking for.

Answer 2

Assuming you're paying rent now, subtract the rent amount from whatever you think you can afford and save it every month.
You can't touch it. You can't skimp on the payment. Put it in a savings account.
For example: If you pay $500 a month rent now, and think you can afford a house payment of $1,000 a month, save an additional $500 a month.
Do this for at least 6 months and you'll have a better understanding of what you can afford. And you'll have a nice chunk of change for closing costs or furniture!
Also, be sure to remember that buying a house is WAY MORE EXPENSIVE than you can even imagine. Don't spread yourself too think because there are many, many things that are going to pop up and you'll have to have the extra income to cover them.
Best wishes!!

Answer 3

FNMA guidelines state that your monthly principal, interest property taxes,mortgage insurance payment (if required) and fire insurance payment should be no more than 28% of your gross monthly income and that payment added to your other monthly installment and revolving debt payments (think credit cards and car payments, exclude things like auto insurance, etc.) should be no more than 36% of your gross monthly income.

Remember though that these are guidelines, not rules. Higher ratios are often allowable depending on your credit score, asset base, job stability, etc.

In order to compute your qualifying payment you would need an amortizing calculator and to know the property taxes on the property you wish to buy.

Your best bet is to contact an experienced mortgage banker and let them pre-approve you. There should be no cost to you to do so.

Answer 4

Everyone seems to have a different answer.

Around here you take your gross monthly income, multiply by 45% and that's the most debt you can handle. That's house cost plus any other long-term debt.

If you are a 1st timer, you might consider taking a free seminar from a non-profit group in your area to help you understand what it takes for you to buy.

Answer 5

Determine what you are comfortable paying per month and how much you have to put down. Then by evaluating the financing you will see what home you can afford.

Here is some additional info. Hope this helps.

Answer 6

1.5 x your gross annual income should be the highest amount you should consider financing. You can find all kinds of lenders who will give you a higher figure, but they really don't care if you can afford groceries.

Answer 7

I've read that housing costs should be no more than one third of your take home income. A mortgage broker can give you specific numbers.

Answer 8

Make sure that your payments (with taxes) are about the same as what you are paying for rent now.