Calculating Your Affordable Mortgage Payment |
To calculate a comfortably affordable home price, most mortgage lenders follow guidelines that are quite similar to one another. Most mortgage professionals will generally only allow a total debt-to-income ratio of no more than 36% in almost all cases as an absolute maximum and even then such a high debt to income ratio being approved is not often. Mortgage companies usually want you to have a monthly housing payment to income ratio of between 28% and 33%. This just means that you remove your monthly debt payments from your monthly income and then multiple that by 0.28 for the conservative end of things and 0.33 for the high end of the spectrum. That will afford you the monthly payment that many banks will feel comfortable with lending and you probably will have a much better chance of successfully getting approved for a home loan if you don't apply for a mortgage that goes above this range.
As well, before you run out and purchase a new home you should also figure in other future needs, which may include such things as your children's college fund or possibly your retirement 401k, even though you may not be paying into these now, you may need to in the future, so its best to consider all possibilities before taking out a 30 year loan even though the bank approved your application.
Another thing that people often forget to factor in are the PMI premiums that are nowadays often required for borrowers that have a high debt to loan value ratio. PMI is basically an insurance policy that the borrower pays so that in the event of default the bank gets its money from the insurance policy as well as foreclosing on the borrower. Typically average PMI can be $50 to $80 per month on a median priced home of $159,000, according to the Mortgage Insurance Companies of America. But it can run as high as $150 per month or more and is something to add into your calculations especially if you are a first time buyer or are not putting a large down payment on the house. And then there are also property taxes, of course, as well as homeowners insurance premiums to be added into the equation as well.
One common rule of thumb that's used in order to figure out how much house you can afford is that you can probably qualify to purchase housing that runs about two-and-one-half times your annual salary, however, this can be subject to variances, depending on your current debt situation.
But you'll do better to use one of interactive calculators available on the web to get a better idea on how your income, debts, and expenses affect what you can qualify for. There are online calculators that you can play around with modifying things like lowering your other debt payments such as credit card bills or enter in differing interest rates. Its a little more sophisticated than I go into in this article goes into but I am using the 0.28 and 0.33 window to calculate the monthly payment that a conservative and aggressive bank would usually accept as a maximum mortgage amount.
Then from that I am amortizing the value and calculating the total maximum mortgage loan that this formula estimates would be the greatest amount that a lender might approve depending the other circumstances such as your previous employment history and so on.
Paul Sardinio NY Mortgage Refinance Thank you for reading my article, I hope you found it useful! Article Source: http://EzineArticles.com/?expert=Paul_Sardinio |
No comments:
Post a Comment