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Abena Langfo…, Renter in Brooklyn, NY

My gross monthly income is $3,681, what percentage should be spent on my mortgage??

Asked by Abena Langford, Brooklyn, NY Sun Apr 15, 2012

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Abena Langford,
Percentages is how we would "Qualify" you for approvals (not meant to guide you)with figures like Bruce's below but you should never make you decisions on something like that. One of the contributing factors for the mortgage mess and foreclosures we have seen for the last few years all started, with mortgage lending based on that premise. Back then the question was 'How much can I afford to buy?' So instead of responsible lending, lenders would let you hang yourself by maxing out your debts vs your income.

The banking industry qualifies off your Gross income, the 1st thing everyone forgets is Uncle Sam is going to take 20%(+plus depending tax bracket) plus 5% for the state of Georgia. So out of 100% your already minus 25% if we qualified you in the old days at 50% you would only have 25% to live off of and hopefully put savings away. This may not be a problem for high wage borrowers but low to middle income families could quickly find themselves in trouble. Check this out...

High wage example -
120k / year = 10k per month minus 30+% (Higher tax bracket) leaves 70% if we let them credit qualify with all their Credit reported payments and a new house at 50% that leaves 20% to live off and save. in this case that's 2,000/ month this could be manageable.

Low wage example -
24k / year = 2k per month minus 20+% (Lower tax bracket) leaves 80% if we let them credit qualify with all their Credit reported payments and a new house at 50% that leaves 30% to live off and save. in this case that's $600/ month this could easily be a problem.

Here's a list of typical basic living expenses outside of credit cards, car payments and Mortages.
Electric 80-120/m(have friends with 300-400/m electric), water/sewer 40/m, Home Gas 50/m(some winters that could be over 200), Auto Gas 200+/m(if you live close or have a very fuel eff car), Auto Ins 100/m (depending on car and DL record), Medical/dental Ins 150-200/m(for an individual, families may exceed 500/M), Cable/Internet 140/m

Just using the lower of these items alone, We are over $850/m and we haven't bought groceries, entertained ourselves, saved, put money aside for eventual home repairs ect.... UPSIDE DOWN (basically they end up living on credit cards)

And this is why after 6-8 years of irresponsible lending customers not only lost their homes but racked up incredible amounts of debts, credit cards ect.. leading to the largest Bankruptcy and Foreclosure wave the World has ever known.

This is why I would never start a home ownership request of with a percentage based platform.

The 1st question I ask every customer is what do you want to keep your Mortgage payments at? This is usually followed by an answer like "Well my rent is 900 and I really don't wanna go much higher than that....." most of the time this is a figure that you have already been paying, had to budget for in the past ect....

Best Solution is tell us what you want for a mortgage payment and let us work backwards. You will always be happy and far less likely to end up as one of the statistics.

I hope that this has answered your question. Please feel free to call and ask anything additional.
Best Wishes,
Rob

Rob Robbins
Senior Mortgage Consultant
Cornerstone Mortgage Group
6151 Powers Ferry Road NW
Suite 610 Atlanta GA 30339
Office 678-578-7613
Cell 404-932-5353
rrobbins@cmghl.com
2 votes Thank Flag Link Mon Apr 16, 2012
I would like to say a very special thank you to Mr.Robbins of Cornerstone Mortgage Group. Mr Robbins took his time to attend to me, living fifteen hours away in NY and not buying at the moment but was looking to be pointed in the right direction. The expert advise, intense knowledge and strategic planning skills was amazing. Mr. Robbins was very thorough in his explanations of every question that I asked and also broke down his answers detail by detail. We spent two hours on the phone and I must say that I am more than grateful to have found someone like him and I recommend him to any buyer. All five stars
1 vote Thank Flag Link Wed Apr 18, 2012
Dear Abena,

How much you should spend on your mortgage is a very personal thing, and could be very different from how much you qualify to borrow. I suggest you prepare a budget of all your expenses for the last year so you can see where your money is going. Then ask yourself if you are comfortable with the amount of money your are spending in each category and if you income is supporting or will support the life style you want to have. Some general categories you should have in your budget included: taxes, insurance (health, life, property, auto), housing, food, clothing, entertainment, furnishings, vacation, and any others that apply to your situation. You will be eligable for a mortgage interest deduction (unless the Feds change that), and you will have maintenance or HOA fees depending on you future housing situation. For the sake of simplicity, assume these cancel out. For a more detailed answer, I suggest you talk to a financial advisor.

Give me a call at 404-425-4945 when you are ready to move, I will be glad to help you out.
1 vote Thank Flag Link Mon Apr 16, 2012
Abena,

I think I may be in a similar situation as you are in. I am looking to move to GA from NJ and need a lot more information on how to do it in the smartest and fastest way. Please email me as we could help one another in this process.

In eager need of information and this post helped.

Thanks,

Sydney Betts
betts.sydney@gmail.com
0 votes Thank Flag Link Tue Apr 17, 2012
I emailed you Sydney! If you did not get it, email me @ ajm52204@yahoo.com
Flag Wed Apr 18, 2012
Dave Herren has hit the nail right on the head. In addition, I would add that my experience has been that lenders will always qualify you for more than you can afford. They are giving you the maximum number of what they will give you. I would caution you to never buy at the top of the number.

A conservative percentage would be one week's income should equal one month's house payment. Now, I know I'm probably going to get some LOLs on that statement, but that is how it was for many, many years and if you use that rule, you should not have to worry about losing your home should a crisis happen to you.

Also, you mention the gross income. This does not reflect the actual money that you have to work with. Do you pay health insurance? Do you have money taken out for retirement such as a 401K? Take your net (take home) pay per week, multiply that by 52 and divide by 12. Try to not to exceed much over that amount if you want to be on the safe side.
0 votes Thank Flag Link Tue Apr 17, 2012
whatever amount you can afford and feel comfortably with spending, given you are approved for that
amount by a mortgage lender
0 votes Thank Flag Link Tue Apr 17, 2012
Hello Abena,

Usually a healthy percentage is 28% just for housing, and 36% for debt to income, however, many mortgage programs allow up to 45% and even higher (with compensating factors like lots of reserves, f.e.).

Hope this helps,

Irina Karan
CDPE - Certified Distressed Property Expert
IrinaKaran@gmail.com
Beachfront Realty, Inc.
0 votes Thank Flag Link Mon Apr 16, 2012
Its best to speak with a Mortgage specialist regarding this matter, please give Iris at Dimension Mortgage at 404-7688882.
0 votes Thank Flag Link Mon Apr 16, 2012
It all depends on how much you can afford based on your personal budget. Lending guidelines for DTI will vary by loan program. Your total DTI should generally not be more than 45-50% of your gross monthly income.

Regards,
Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
rodney.mason@prospectmtg.com
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle Renovation | VA | USDA | GA Dream | Jumbo Financing
0 votes Thank Flag Link Mon Apr 16, 2012
The best answer is what you are comfortable with and able to afford. Lenders recommend 25-28%, 33-38% with good credit and little to no other debt. There are mortgages which consider homes that are highly energy efficient and allow higher percentages of income allocated to your mortgage payment. You can ask your lender about energy efficient mortgages. I have worked with people who were very frugle, that were able to allocate higher percentages of income to mortgage payments. It is a lifestyle choice.
0 votes Thank Flag Link Sun Apr 15, 2012
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