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Old 11-06-2011, 08:13 AM
 
20 posts, read 104,064 times
Reputation: 17

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My husband and I are having a little bit of difficulty understand how much home we could afford. We know we will need to get pre-approval to know for sure, but we want to wait unil after the new year to get the pre-approval.

We are interested in purchasing a house that is between $300,000 - $350,000. Typically, the yearly tax cost for houses in the towns we are interested in cost $7000-$9000 (Nassau County, Long Island, NY). Our yearly gross income is approximately $82,000. Our credit scores are both over 700. Mine is approx 770 and my husband's is approx 715. We are looking to get an FHA loan and put 3.5% down payment on the house. Our only back-end ratio amount (besides the anticipated mortgage payment) is our student loans, which is approximately $600/month combined. We both do not have car payments and we never carry a credit card balance month to month (we pay all balances immediately). We are currently renting and our monthly rent is $1550.

Whenever I use an online mortgage calculator, it seems to come up that we can only afford a house that is $270,000. However, some FHA sources indicate that we could possibly afford a house that is within our target price range ($300,000 - $350,000) through applying for an FHA loan.

Could you please provide your expertise in this area and give us your opinion on the approximate cost of a house we could afford using a 31/43 DTI ratio (FHA max ratio)? I also read on some sites that these numbers could go higher with good/excellent credit. Would banks really be open to giving us a loan with a higher DTI ratio?

Thank you so much for your assistance! We would love to buy a house but we want to wait until we can get a house within our target price range. Any information you could provide would be greatly appreciated!
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Old 11-06-2011, 10:40 AM
 
418 posts, read 894,368 times
Reputation: 206
I have to say that I am not familiar with FHA loans, but here are simple calculations:

Say, you want to buy a $330k house, and need a mortgage of $320k.

Your monthly gross income is $6833.
Other debt: $600
Pure(*) mortgage payment (30y fixed, 4%): $1530
(Taxes + homeowner's insurance - $12k/y total): $1000

Up to here you have: $3130/$6833 --- 46% DTI ratio

(*) This is optimistic scenario, because FHA loans should have some other embedded costs as penalty for the low downpayment, i.e. you may expect some $100-$400 extra a month added to the mortgage payment.
The 4% interest may be the best/lowest offered by the bank, from there you add some penalty pts (say, additional 0.25% for sub-optimal scores).
Your score would qualify for the best rate, your husband's - most like will not, but that will be determined by the bank.

If the house has much lower taxes, then you may absorb the added monthly expenses within that same 46% DTI.
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Old 11-06-2011, 11:09 AM
 
Location: Long Island, NY
1,743 posts, read 2,943,371 times
Reputation: 1752
Please dont be offended by this but I just dont think you can afford a house on Long Island with only a household income of $82k. My husband bought a home worth $300k (2 bedroom) back in 2004 (house would sell for 250k now) and he had a similar income, HOWEVER he saved at least $175k as a downpayment. His mortgage was only $180k or so.

When I bought my condo in Queens for low $200s, I was earning in the low to mid $60k range and i was struggling to make that monthly payment which included PMI, escrow, maintenance fees (which always go up!) plus unexpected expenses that come with home ownership. My biggest regret was only putting down 3.5% at closing..when I lost my job 2 months later, my parents had to loan me cash to help pay for some of my expenses. It was a hard lesson to learn.

Based on your income, you really need a larger downpayment or need to look at lower priced homes. Depending on the town, you are looking at not just property taxes/school taxes but also village taxes and heating/cable bills, etc...it really adds up! I cant fathom paying at least $2500/month when your monthly take home pay is only $3,500. Thats just not much breathing room.
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Old 11-08-2011, 07:43 AM
 
Location: Lending in all 50 states
187 posts, read 692,647 times
Reputation: 109
Quote:
Originally Posted by ellie424 View Post
My husband and I are having a little bit of difficulty understand how much home we could afford. We know we will need to get pre-approval to know for sure, but we want to wait unil after the new year to get the pre-approval.

We are interested in purchasing a house that is between $300,000 - $350,000. Typically, the yearly tax cost for houses in the towns we are interested in cost $7000-$9000 (Nassau County, Long Island, NY). Our yearly gross income is approximately $82,000. Our credit scores are both over 700. Mine is approx 770 and my husband's is approx 715. We are looking to get an FHA loan and put 3.5% down payment on the house. Our only back-end ratio amount (besides the anticipated mortgage payment) is our student loans, which is approximately $600/month combined. We both do not have car payments and we never carry a credit card balance month to month (we pay all balances immediately). We are currently renting and our monthly rent is $1550.

Whenever I use an online mortgage calculator, it seems to come up that we can only afford a house that is $270,000. However, some FHA sources indicate that we could possibly afford a house that is within our target price range ($300,000 - $350,000) through applying for an FHA loan.

Could you please provide your expertise in this area and give us your opinion on the approximate cost of a house we could afford using a 31/43 DTI ratio (FHA max ratio)? I also read on some sites that these numbers could go higher with good/excellent credit. Would banks really be open to giving us a loan with a higher DTI ratio?

Thank you so much for your assistance! We would love to buy a house but we want to wait until we can get a house within our target price range. Any information you could provide would be greatly appreciated!
Hi Ellie,

Here is what I have for an estimated payment and your debt to income ratios.

Purchase price of $350,000 - your down payment of $12,250 (FHA's 3.5% requirement) = a loan amount of $337,750.00 + FHA's upfront mortgage insurance premium (1% of the loan amount) = $341,127.50

$341,127.50 at 3.75% on an FHA 30 year fixed gives you a principle and interest payment (PI Payment) of $1,579.81.

I estimated your home owner's insurance at $1,800 per year or $150 per month.

I estimated your property taxes at $8,000 per year or $666.66 per month.

FHA monthly mortgage insurance is going to run you $320.97 per month.

Now add all of these numbers up to get an estimated total monthly payment of $2,717.44. This is almost double what you're paying for your housing expense right now. Is that something you're comfortable with?

To get your debt to income ratios take your proposed housing payment ($2,717.44) and divide it by your gross monthly income ($6,833.33) to get your front end ratio of 39.76%
To get your back end debt to income ratio take your proposed housing payment ($2,717.44) and add the student loan payment of $600 to get $3,317.44 and divide it by your gross monthly income ($6,833.33) to get your back end ratio of 48.85%.

So your DTI (debt to income) ratios would be 39.76%/48.85%. These ratios are eligible on an FHA loan.

The biggest concern is are you prepared/comfortable with the estimated payment.
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Old 11-08-2011, 08:03 AM
 
Location: Mount Laurel
4,130 posts, read 7,997,926 times
Reputation: 3379
$300K home would be stretching it based on your household income. $350K will get you in trouble. Home ownership get expensive rather quickly as your yearly taxes will continue to rise.
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Old 11-17-2011, 02:34 AM
 
25 posts, read 84,906 times
Reputation: 26
That does seem like a pretty high payment for your annual income... My husband and I make a combined income of $135K/year in a substantially less expensive market, and we're still not comfortable going over $250K w/ $20K down.

From my experience, though you qualify for FHA standards, the actual lender may take other factors into account, such as how much you have in savings, etc.

Good luck!!
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Old 12-04-2011, 01:15 AM
 
Location: Long Island (chief in S Farmingdale)
18,425 posts, read 14,418,390 times
Reputation: 3746
NMB pretty much was spot on. You should have no problem at getting approved for an FHA loan. Some lenders will go up to a 45/55 DTI ratio on an FHA loan. The question is whether or not you feel you would be comfortable with the payment.
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