How much house can I afford?

[VictorBurek]

There is 2 ways to answer your question. What you feel you can comfortably afford, and what the lender says you can afford. Of course, the first question only you can answer. The second one though i can help you with, lender will generally approve you with a debt ratio of up to 50% of your gross income(before taxes). I have seen approvals to 65% with compensating reasons such as large down payment, lots of assets, high credit score. So, if you make 65k per year, your monthly income is around $5500 per month, and 50% of that means to the lender you can afford $2750 per month in monthly payments. The only items counted against this is anything that shows on your credit report such as car loans, student loans, credit cards.. and they do not count cell phone, car insurance, etc.. So add up your monthly payments and subtract from 2750, for example, lets say you have a 350 car payment, 100 student loan payment and 150 credit card payments, that totals 600 in other payments which you can subtract from your 2750 gross income leaving $2150. As another general rule, assume your mortgage payment with taxes and home owners insurance is 1% of the purchase price, so a $200,000 home should have about a $2000 payment(but the payment will be less and this assumes a 30 year mortgage). So, assuming you have the monthly payments i typed earlier, you can afford up to a $215,000 home according to lender. Please post back you monthly payments and i can help you figure this out, but like i said earlier, only you can determine what you feel is a comfortable payment for you but i can help you determine what the lender says you can afford.

[VictorBurek]

Originally Posted by llkltk

You need to have good credit in this economy to get a loan. No debt as well. Consider those things also.

Please do not make such statements that are so far from the truth and not accurate. You can definitely get a mortgage even if you have other debt. You must have decent credit to get a loan and government loans such as fha and va you can have credit scores in the 500's and still get a loan at a sub 7% rate.

There is so much inaccurate information out there so be careful when you give an opinion that is not based on any facts.

[Mckellyb]

One thing many folks overlook is car payments.

If you dig on new rides, then you're going to have $700-$800 going into a never-ending depreciation hole. This is accounted for in loan applications, but only on what you have outstanding, now.

If one car is paid for, the other is only $325/mo., but you think you're going to be able to swing $1,300/mo payments and two new car payments...stock up on Top-Ramen.

People often overlook 'haggling' on closing cost and fees. On our last house, I used a place which had offices literally less than five minutes from where I worked. This was in OR, FWIW. Anyway, I went through their list of fees, and told 'em I'm not paying for making copies, I'm not paying for mail charges...there were four or five others as well, which were either duplicates of other, valid, items, or IMO, invalid items. I said to them, outright, if you need to 'mail' something to me, call me, I'll be here in ten minutes. Same for copies....that's a cost of doing business, you're not getting it from me on top of the other fees.

They gave me the ability to fight/question their additional costs, which was a mistake on their part. I recall I knocked a solid $600 off the closing costs. All it took was three minutes of looking over the itemization of charges to see duplicates and things like that. Most folks don't even look at it, I guess, or are too busy thinking about the new house, they're otherwise distracted.

[HappyTexan]

Originally Posted by VictorBurek

There is 2 ways to answer your question. What you feel you can comfortably afford, and what the lender says you can afford. Of course, the first question only you can answer. The second one though i can help you with, lender will generally approve you with a debt ratio of up to 50% of your gross income(before taxes). I have seen approvals to 65% with compensating reasons such as large down payment, lots of assets, high credit score. So, if you make 65k per year, your monthly income is around $5500 per month, and 50% of that means to the lender you can afford $2750 per month in monthly payments. The only items counted against this is anything that shows on your credit report such as car loans, student loans, credit cards.. and they do not count cell phone, car insurance, etc.. So add up your monthly payments and subtract from 2750, for example, lets say you have a 350 car payment, 100 student loan payment and 150 credit card payments, that totals 600 in other payments which you can subtract from your 2750 gross income leaving $2150. As another general rule, assume your mortgage payment with taxes and home owners insurance is 1% of the purchase price, so a $200,000 home should have about a $2000 payment(but the payment will be less and this assumes a 30 year mortgage). So, assuming you have the monthly payments i typed earlier, you can afford up to a $215,000 home according to lender. Please post back you monthly payments and i can help you figure this out, but like i said earlier, only you can determine what you feel is a comfortable payment for you but i can help you determine what the lender says you can afford.

That 50-60% is way too high. Yes I know lenders have laxed their standards but you can see where that got us (America).

It used to be 28% for housing, 38% for total expenses including housing.

If you use those figures then you can probably have some money left over every month for savings.

[VictorBurek]

Happy Texan, when i said 50% that was for total debt ratio. i always look at the total debt ratio. Also, i was just letting the OP know what lenders will accept and that is why i clearly stated that the OP decide what they feel they are comfortable with. But you are correct in that the lower your debt ratio the better.

[banker]

I would do no more than a mortgage of 2X your annual income. If you want more house than that...increase your down payment. I have a house that is 3.4X my income, but my mortgage is 2X my income. The difference I made up in the down payment. We have no other debt and plan to keep it that way. If you have kids (I have two - the wife stays home) then you need to keep room in your budget to save for college, not to mention retirement. In this economy then you need to be extra careful on your home purchase. Things are going to get much worse before they get better.

[llkltk]

Originally Posted by VictorBurek

Please do not make such statements that are so far from the truth and not accurate. You can definitely get a mortgage even if you have other debt. You must have decent credit to get a loan and government loans such as fha and va you can have credit scores in the 500's and still get a loan at a sub 7% rate.

There is so much inaccurate information out there so be careful when you give an opinion that is not based on any facts.

Okay, here we go again, more foreclosures.

[Trainwreck20]

Cabolissa - if you haven't gotten the info you need, please repost in the Mortgages forum.