How do you figure out how big a mortgage payment you can afford?

Asked by Andrew Wilkinson, San Francisco, CA Wed Feb 29, 2012

Help the community by answering this question:

+ web reference
Web reference:

Answers

11
Aaron Mtuanwi, Agent, Conyers, GA
Thu Mar 1, 2012
Current debt to income ratio. Include savings, to be realistic. That simple.
0 votes
, ,
Thu Mar 1, 2012
I discuss long and short term goals with my clients when they want to know how much house they can afford. . Mortgage payments are not islands which are how most people view them. There is nothing magical or mystical about a house payment, the money comes from the same income stream as a credit card payment or car payment. In my opinion the only sane way to answer this question is to look at the borrower’s entire financial picture. You would be shocked at how many people have no debt strategy whatever let alone a debt free target date.

Okay, that was my two cents worth, but you probably just wanted to know how borrowers are qualified to see if they can be approved for a mortgage loan. I use Calyx Point as my origination software, I can tell by looking at the credit report and entering a few basic numbers on the first page if they will qualify for a certain number. To be safe I run AUS.
0 votes
David Herren, Agent, Atlanta, GA
Thu Mar 1, 2012
To figure out how big a mortgage payment you can afford, prepare a list of every expense you have for a whole year except housing costs. Add up these expenses and subtract them from your annual income. Then subtract a portion for savings and emergencies. Divide the remaining amount by 12, and you have the amount you can spend on a mortgage payment each month. This is a very simplified answer, If you do not understand what I just said, get a book, or hire a financial adviser.

NEVER get a loan for more than you can afford. NOT EVER!

Good luck!
Web Reference:  http://bestatlproperties.com
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Thu Mar 1, 2012
Mortgage Lenders today want to verify three things Income, Assets and Credit. The single most important thing any buyer can do when getting ready to buy a home is to get themselves pre-approved for a mortgage, This entails meeting with a lender and discussing your finances with them They'll wan to know about your job, how long you’ve worked there, salary etc. They will want to see recent pay stubs and check your last two years of tax returns. (Income) Next they want to know how much cash you have on hand or in the bank and will look to verify this. (Assets) Finally they'll check all three major credit reporting agencies at which point they will be able to tell you what you can afford. (Credit).

As a buyer broker specialists I'd recommend to my clients who are pre-approved that for their own benefit they may wish to consider looking to buy a home that's 115% less than the amount the lender pre-approves you for. This way you're not pushing the envelope and should be able to handle the mortgage payment easily.

I've attached a link below to a recent blog I posted here on Trulia that may interest you that delves a little deeper into the aspect of your Credit.

Hope this helps.
0 votes
davidwbrower, , Woodstock, GA
Thu Mar 1, 2012
By how big of a house they want and how much they want to be consumed with debt. There's a new thing out there... it's called GOOGLE.

I love it Gerard... lower taxes for higher income earners. That makes total sense. I wonder what the national average income is of those losing their homes to foreclosure? That would make an interesting stat.
0 votes
Gerard Carney, Agent, Spring Hill, FL
Wed Feb 29, 2012
For people making $100,000 per year and less I would recommend no more than 30% of your income where as if you are making more than $100,000 a year you could go to as high as 37%. The reason for lower percentages in the under bracket is because tax rates are higher and you have a basic living factor that you must make on less money.
0 votes
Robert Robbi…, , Atlanta, GA
Wed Feb 29, 2012
We never Max Qualify a borrower to see how much they can afford. This is a sure way to spell disaster(note home foreclosures due to Interest only ARMs from 2003 - 2007) Max qualifying would equal close to 50% of your gross income. What most people forget is that Uncle Sam takes 25-30% off the top. This would leave a borrower with only 20-25% to pay all utilities, food, car, gas, insurance, etc...... This is usually unrealistic unless someone is making a very large remaining salary.
My 1st question to my clients is "How much do you want to keep your monthly payments at?" using that figure, I'll back out an expected $ amount for taxes and Insurance. Then also figure out how much down payment you are planning to use. With that I can estimate a purchase amount you should be looking for.
I hope that this has been helpful.
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
Toll Free 866-430-0970
Cell 404-932-5353
Fax 678-388-1336
http://www.cmg-homeloans.com
Georgia Residential Mortgage Licensee - 21412
Company NMLS - 147913: Individual NMLS - 247773
0 votes
Roland Vinya…, Agent, Sprakers, NY
Wed Feb 29, 2012
I would first do a budget and see just how much money you have left from your income (less other expenses) to devote to debt repayment (and taxes, insurance, and upkeep). Then go to a reputable mortgage lender and let them tell you what you can afford. Then take the lower of the two figures.
0 votes
Adrian Provo…, Agent, Atlanta, GA
Wed Feb 29, 2012
I would suggest speaking with multiple mortgage lenders.

Best Regards,

Adrian Provost
0 votes
KW Turtle Gr…, Agent, Decatur, GA
Wed Feb 29, 2012
Well first you should consult a lender and see what you can afford. You can also base it on doing a simple monthly budget. I am sure if you google "budget" there are plenty of free samples you can use.
Web Reference:  http://chucksmithgroup.com
0 votes
KW Turtle Gr…, Agent, Decatur, GA
Wed Feb 29, 2012
Evening Andrew...long time no see!

The best way to determine that is to speak with a mortgage lender or broker. They can review all of your financials and determine what loan program you can qualify for and how big a down payment you will need. We have several lenders that we work with and would be happy to refer you to someone.

Thanks,
Chuck Smith
The Chuck Smith Group
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more