How to find out how much we can afford.?

Asked by Laura, 07009 Thu May 7, 2009

My fiance and I are thinking about buying a home. We are unsure of how much we are able to afford. Are there any ways to find out how much we will be approved for (aside from preapproval) that will NOT have an impact on our credit score?
Also, I have recently suffered a pay-cut, but he will be changing jobs and receiving a pay increase, overall, we will be making more than 2008 in 2009--Will the changes in our salaries be taken into consideration, or will our W-2's from 2008 be our only financial representation?

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7
Tara Sheng, , 07046
Thu May 7, 2009
HI Laura, very good questions!

First of all you picked the right year to look for a home! Do you know about the $8,000 tax credit for buying a home before November 30th (the transaction must close by Nov. 30). I recommend attending a fabulous Free Homebuyers Seminar on Thursday, May 14th at 7pm. Here the tax credit will be explained in detail, as well as home affordability, our historically low interest rates, etc. Also this is a perfect opportunity to ask all your questions and learn from others' questions. Just RSVP at 862-242-0688 or by e-mail at tsheng@weichert.com

As for your questions, the first step in finding out the price range you can look within for your new home is by being prequalified. And everything will determine the amount for which you can get a mortgage...including recent pay stubs, bank statements, etc. I know an extremely trust-worthy finance specialist that can help you with this and to answer all other questions you & your fiance might have. Feel free to contact me for his information at 862-242-0688 or tsheng@weichert.com

Take care & I'm here if I can be of any more assistance,
Tara
Web Reference:  http://TaraDreamHomes.com
1 vote
Corey Grushin, Agent, East Brunswick, NJ
Thu May 7, 2009
Speak with a loan officer to be sure, but basically you can borrow 3 to 3.5x your annual income. By the way having your credit pulled by a mortgage rep is not going to negatively affect your credit score. Having it pulled by 20 representatives will.
1 vote
Laura, , 07009
Mon May 11, 2009
Thank you everyone for your answers. We are going to try to find a loan officer to sit down and figure out how much we will be able to work with.


To answer some of your questions, yes, he will be remaining in the same industry; I am glad that the pay stubs, and not just the W2s will be taken into consideration so that it accurately reflects how much we can realistically afford at this point in time. I have excellent credit (>750 last I checked), his is probably less than desirable. No school loans, or credit card debt (we do carry high monthly balances >$3000/mo, but pay them off within a 45-day period as these are work-related expenses that he pays off through reimbursement through his employer). We each have car payments, all together, our out of pocket monthy expenses are approximately $$740 for car payments and insurance, say $500 to overaccount for personal revolving credit accounts. I don't know how we would go about calculating debt-to-income ratio since our credit card bills are artifically high, and the only "real" debt we have is car loans/insurance.
I believe we make approximately $80,000 combined gross income; would we be eligible for an FHA home loan? We have a very minimal down payment available money (~$10,000).
0 votes
Ruth Bonapace, , 07030
Sun May 10, 2009
Laura

Your new salaries will be fully accounted for, not your W-2 income, as soon as you start your new jobs. The lender will look at your most recent paystubs and, if you have one, the job offer letter. While there are simple formulas for calculating how much you qualify for, these are not always terribly helpful in deciding how much you want to spend and there are other factors that come into play.

I have been a mortgage loan officer for nearly 15 years and as part of the Trulia community if you would like me to go over the calculations with you ... without running your credit ... I would be happy to do so. Just email me and I will go over what you need.

Ruth Bonapace
mortgage specialist
ruthbonapace@gmail.com
0 votes
Laura Gianno…, Agent, Manahawkin, NJ
Thu May 7, 2009
Great answers, and great work on your part, please don't forget to factor in other costs. Check this out...

http://www.trulia.com/blog/laura_giannotta/2009/04/budget_ad…

Good Luck!

Laura Giannotta
Keller Williams Atlantic Shore
0 votes
Jeremy S. Hi…, , Cherry Hill, NJ
Thu May 7, 2009
Well how good are you with math. You can determine what you'll be able to afford by using a simple formula. If you are going to purchase using a FHA loan you can do so by putting a minimum 3.5% down of the sales price. FHA rates have been averaging around 5% lately. You'll need a minimum 620 credit score. There are exceptions to these next calculation but use this as a general rule. DTI or (debt-to-income ratio). Calculate what your combine monthly gross income is. Then calculate what your monthly minimum payments are. That's is revolving credit cards, students loans, car payments. Things like cell phone and cable and utility bills don't count because that does not show up on your credit report as a monthly payment. Your monthly debt should be no more than 31% of your gross income. And when you add your proposed monthly housing expenses (principal and interest, taxes, insurance, condo/ assoc. fees, PMI) then that number should be no more than 41%. This is a general rule of thumb for it is possible to get a approved when the number are slightly outside those limits but as that as a reference. You can google mortgage calculator or go to my site http://www.SouthNewJerseyHomes.com under the resouce tab you will find free mortgage calculator software that you can download. Excellent tool because you can compare 3 different sale prices and rates head to head. Hope that helps!

Disclaimer: This is not an offer for credit but just a simple reference for homebuyer to use. Potential homebuyer should obtain a free copy of their own credit report or join a credit reporting agency. Thus they can avoid a merchant inquiry on the credit report. Happy House Hunting!!

Jeremy S. Hill, Realtor Associate
Keller Williams Realty,
http://www.YourNJHomeSearch.com
Office: 856.685.1651
Direct: 609.876.5817
Fax: 609.482.8235
Licensed PA, NJ
"Your Interest 1st Always"
0 votes
James L Stec…, Agent, Montclair, NJ
Thu May 7, 2009
Laura,
If your fiance is changing jobs I hope it is in the same field.That will be important.There really is no substitution for sitting with a loan officer to work out your buying power.
You can shop for a mortgage and have your credit checked an number of times in a 30 period without it affecting your credit score.Dont let a mortgage person tell you that if he or she does they are lying to you and You shouldnt be dealing with them anyway.
They will need your last 4 paystubs probably so you cant avoid showing that and just using W2's.
I can set you up with someone that is very honest and will tell you the truth.Whatever you do provide everything up front. You can be pre-approved and be denied the loan later on down the road sometimes days or a few weeks before you close.The are a whole bunch of other factors that we need to know also ie:Downpayment,Closing Costs ect the loan has to be structured correctly along with the contract of sale to have smooth saling these days.
Shoot me an email to discuss if youd like
jsteccato@weichert.com
0 votes
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