|
The amount of
loan for which you qualify is based on two
different calculations. Using what are known as
qualification ratios, lenders evaluate your
income and long-term debts to determine a "safe"
amount for your mortgage payments. A fairly
standard ratio is 28/33. Certain mortgage plans
sometimes use more liberal ratios - for example,
the FHA currently uses 29/41.
Here's how it
works: With a 28/33 ratio, you'd be allowed to
spend up to 28% of your gross monthly income for
mortgage payments. The lender will then run a
different calculation. This one is your loan
payment and debt payments combined, which may
not exceed 33% of your gross monthly income. To
calculate exactly how much you may borrow, you
also need an estimate of current interest rates.
For
Example:
Suppose you had $1,000 a month for mortgage
payment; at 7% that would let you borrow about
$160,000 on a 30-year loan. At 6% the loan
amount would be nearly $175,000. If your rate
were 8%, the loan amount would be a bit less
than $150,000.
As part of
this calculation, you also need to estimate and
include the property taxes, homeowner’s
insurance, and Homeowner Association fees (if
applicable) you might need to pay, which are
considered part of your monthly expense.
Begin the home
buying process by using our mortgage calculator
to determine how much you can afford, or visit a
REALTOR®® or mortgage lender and they can analyze
it for you.
<<BACK
NEXT>>
Return to the Buying a Home Page
Click
Here to get immediate help Buying Your Home,
|
