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Dec Newsletter 2007

 

How Much Home Can I Afford?

This is determined by your gross yearly income and your current
long term debt.

Income includes all income reported by W-2 forms and/or 1099 forms.

Income usually includes husband and wife or total income of parties
purchasing the home and signing the mortgage.  (all parties must qualify
for the loan and have good credit rating).

Current long term debt consist of all Auto loan payments, student loans,
bank loans, credit card debt, etc. which has more than 6 months of payments
to pay off the debt.

Alimony is considered a debt and in some cases so is Child support.

Good credit rating is extremely important in securing a mortgage at the
best rates.

Less than perfect credit can sometimes still qualify but you will end up paying
a higher interest rate for the first 2 years after which time the rate is re-evaluated
based on payment history.

The ratio of how much payment you can afford is:

Conventional Payment (including taxes and insurance on new home)
36 % of your monthly gross income  minus  your total monthly long term debt
payments.  Total mortgage payment including taxes and insurance cannot exceed
28% of gross monthly income.

FHA and VA  Payment (including taxes and insurance on new home)
 41% of your monthly gross income minus your total monthly long term
debt payments.
 Total mortgage payment including taxes and insurance cannot exceed
29% of gross monthly income.

**People often qualify for more of a payment than they are comfortable with.   
It is important to know your lifestyle and how much of a payment you are
comfortable with.

**all mortgage loans usually require that you have been in the same field of
employment for 2 years especially if self-employed.    

**acceptable income is income which is verified by the last 3 years of W-2 forms.  
If you haven't shown income on your tax returns, it can't be counted towards
qualifying for a mortgage.