My fiance and I are looking to buy our first home and would like to know the percentage of our monthly income that should go towards our mortage payment. We've heard everything between 10% to 25% to 50%. We would like to know a safe percentage rate so we know how much house we can afford. Thank you!
2007-07-29 14:57:08 · 8 answers · asked by Emily 4 in Business & Finance ➔ Renting & Real Estate
I have worked for a wholesale lender and can tell you some pretty general guidlines a bank uses to establish what is "affordable" to you as a consumer (and to minimize their risk). Typically if you have good credit, you will be able to go for a conventional loan otherwise known as an "A" paper loan. In that case depending on how much you put down (usually they like 20% or you will pay mortgage insurance) your debt to income ratio should be no more than 35% on the back end. When I say debt to income ratio, all of your outstanding debt payments (credit card, car, loans, new mortgage you are going for, etc...) vs you and your finances gross monthly income. A quick example would be the following: $3000/month debt including new mtg pymt divided by $9000/month gross income figure for both people= 33% back end debt ratio. In this case with an 80% loan to value (20% down payment) you would qualify for the loan in the bank's eyes. One VERY important thing to remember is that even though the bank qualified you, they qualify you on your gross income, yet you live on your net income (after tax income). That means you could be losing 25-30% to taxes so you may want to keep your debt to income ratio a little lower since you may want to vacation, buy stuff or save money for a rainy day. If you have to have somewhat of a marked up credit record, you can get a non-conventional loan or B/C loan and the debt to income ratio can go as high as 55% in some cases (50% in most cases). You will pay for it in the rate, probably by 2% or so. Hope this helps.
2007-07-29 16:21:10 · answer #1 · answered by Always Right 2 · 0⤊ 0⤋
The best way to figure out how much house you can afford is to go talk to a bank or mortgage specialist. They will talk to you about your income, other expenses (credit card debt, car payments) whether you have money for a downpayment, and your credit score, and they will be able to estimate how much money you can borrow, which therefore tells you what price range you can afford.
Do you rent currently? I think the easiest way to figure out much you could afford monthly is to write out a budget. How much you pay for rent now as well as groceries, gas, utilities, etc. If you still have money left over, then maybe you can afford a mortgage payment a little bit more than your rent right now.
2007-07-29 15:07:52 · answer #2 · answered by Emily V 3 · 0⤊ 0⤋
It depends on how a person wants to look at the situation. Many people choose to live in an apartment because they don't want to have to deal with coming up with money to pay for items when they break or go wrong. Many also don't want to have to deal with the upkeep of the exterior of the home including the home itself and the yard. Others just don't want the complesity of owning a piece of real estate. However on the other hand, many people choose to buy a home because they feel as though they aren't just throwing money down tubes. They will actually have something to show for it in 10-30 years. Others want to obtain a sense of pride and show off by owning a home and being able to do what ever they want to the inside and outside of the building. Plus sometimes you can actually get more space and buildings for the price of your morgage than you can when you rent. Its totally up to the person themselves.
2016-05-17 08:15:32 · answer #3 · answered by ? 3 · 0⤊ 0⤋
You should get married first, but I would say you don't want to pay more than 25% because at some point the house owns you--you can't take a vacation, you can't go to dinner, etc.
2007-07-29 15:01:02 · answer #4 · answered by Nelson_DeVon 7 · 1⤊ 0⤋
The "safest" way is to keep the payment at a rate that if either one of you ever lost your job, you will not loose the house. This rule has served us well.
2007-07-29 15:05:38 · answer #5 · answered by david m 3 · 0⤊ 0⤋
I am a Realtor in Oregon. It used to be 25% of your income but for quite a few years now 33% of your income is considered OK.
2007-07-29 15:00:36 · answer #6 · answered by caddemd 2 · 1⤊ 1⤋
take your weekly pay check and add her weekly pay check together and this will be you house payment . good luck in getting the bank or loan co. to take her pay check as part of the payment it is hard to get one to here in the carolina,s
2007-07-29 15:03:16 · answer #7 · answered by BOB 3 · 1⤊ 2⤋
i think it's a third of your monthly income.
2007-07-29 15:04:29 · answer #8 · answered by mups mom 5 · 1⤊ 1⤋