I have no debt, can I get a mortgage for a more expensive house? (approved, credit card)

[Curious Discussion]

They say mortgage providers are really strict and would prefer to give a mortgage for under 30% of the applicants gross income. We are NOW thinking of buying instead of renting but want to get a nicer home that would push the limits of qualification.

Our credit scores are in the 820 range (FICO), and we have never missed a mortgage or rent payment. We have steady income. We have no debt. No car payment, no credit card payments, no student loans, etc.

Would a mortage provider approve a mortgage for closer to 37% of our gross income if we gave a high down payment and we could show we had absolutely no monthly debt and lots of money in the bank?

[Jbeechuk]

I know it is possible, depending on what type of mortgage you get. VA and I think FHA mortgages will go that high. Typically, your total debt should not exceed 36% of your income. You don't have any debt now, but will you several years down the road? A new car perhaps?

[Pfhtex]

Originally Posted by Curious Discussion

They say mortgage providers are really strict and would prefer to give a mortgage for under 30% of the applicants gross income. We are NOW thinking of buying instead of renting but want to get a nicer home that would push the limits of qualification.

Our credit scores are in the 820 range (FICO), and we have never missed a mortgage or rent payment. We have steady income. We have no debt. No car payment, no credit card payments, no student loans, etc.

Would a mortage provider approve a mortgage for closer to 37% of our gross income if we gave a high down payment and we could show we had absolutely no monthly debt and lots of money in the bank?

Please note that this post will be judgment and advice-free, and will reference actual mortgage guidelines.

VA: Total debts(house payment+all credit report monthly payments) upwards of 60% of total gross income.*

FHA: 54.9% of Total Gross Income.*

Conv: 49.99% of total gross income.* (LP approval, compensating factors)

Conv: 45% of total gross income.* (This is the traditional benchmark)

The above references your total debt ratio. The ratio of the house payment itself (PITI) against gross income is another ratio that is evaluated. This is where a % in the 30s tends - - tends - - to be the upper threshhold. Having said that, I've done many files with housing ratios in the 40s, it depends on the total file score.

*As always, there are many components to qualification besides credit score and debt ratio, and as such, your mileage may vary if you have deficiencies elsewhere. Also, debts not found on the credit report such as child support, will be factored in as monthly debts)

[luv4horses]

Just a caution, in that what you are proposing is called "living beyond your means". It leaves little flexibility in your finances, and suggests you will be burning through your money a little too quickly for it to be sustainable.

[TimtheGuy]

Originally Posted by Curious Discussion

They say mortgage providers are really strict and would prefer to give a mortgage for under 30% of the applicants gross income. We are NOW thinking of buying instead of renting but want to get a nicer home that would push the limits of qualification.

Our credit scores are in the 820 range (FICO), and we have never missed a mortgage or rent payment. We have steady income. We have no debt. No car payment, no credit card payments, no student loans, etc.

Would a mortgage provider approve a mortgage for closer to 37% of our gross income if we gave a high down payment and we could show we had absolutely no monthly debt and lots of money in the bank?

Yes, easily approve-able at 37%. Will not require any "extra" down. May be best to stick to 20% or 25% down and keep the rest of the cash in savings.

[SmartMoney]

Lenders will also look at what you currently pay towards housing, in addition to how much is put towards savings. The ability to pay and put away an amount equal to the proposed mortgage payment speaks volumes. The first step is to figure out your comfort level, not a payment someone else sets for you.

[ericp501]

Wife and I make over $150k and just bought a home around 2.6-2.7x our income. Rule of thumb says 3x income. We're overall frugal people, have $400 in student loans, and follow a pretty tight budget that consists of packing lunches and only eating out/order in about $100 worth a month.. Once a baby comes its gonna feel like we're living paycheck to paycheck. We love our home and don't regret our purchase, but honestly I wish we had gone with something about 10% cheaper so I could apply the extra $ toward retirement.

We're far from house poor and maybe I just have buyers remorse but I'd strongly suggest you build a full budget for the places you're looking at and go speak with a financial planner before you lock yourself in.

Remember, the second you sign that paperwork you need that home to increase 6% in value just to break even (Realtor commission)

FYI we got approved for over 20% higher than what we ended up buying, plus our home was appraised higher than we paid giving us instant equity, and the little imperfections that brought down the price were replaced for less than $3,000 and likely increased value 2-3%.. Still I wish we went cheaper.