Is a $490K loan doable at $120K/annual salary?

Asked by igoyin, Millbrae, CA Tue Jun 3, 2008

I'm making $120K a year. Want to buy a $519K house with $30K down. Is this doable?

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Jeffrey Schnabel’s answer
Jeffrey Schn…, Agent, Austin, TX
Tue Jun 3, 2008
Igoyin,

The principle and interest payment would equate to 30% of your gross income. When you tack on taxes and insurance, you've exceeded the typical 28% front-end ratio that many lenders use as a hurdle. The limits are tied to the type of loan, FHA use to push as high as 29% and some conforming loan sources would go as high as 33%.

The next thing they have to consider is your other consumer debt. When combined with the above debt, the ratios should not exceed 36% on average, although FHA may permit as high as 41% and some conforming loan sources will go as high as 45%. Note FHA had tightened and then loosened some qualifications, so check with a reliable lender that is recommended to you by a trusted source.

However, even if you can qualify, you're putting very little down (6%), and you're pushing the edge of reasonableness on your housing expense. Tread carefully, since the downside of over buying is pretty negative all the way around.

Here are some links to good background data, but since the market is changing as we go through the mortgage debacle, some of it can become dated quickly:

http://homebuying.about.com/od/buyingahome/f/030508_Affordab.htm
http://frugaldad.com/2008/02/06/the-frugal-home-mortgage-cal…
http://www.answers.com/topic/debt-to-income-ratio?cat=biz-fin

Good luck,

Jeffrey
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The Hagley G…, Agent, Pleasanton, CA
Tue Jun 3, 2008
There are a lot of factors that come in to play. Your best bet is to talk to your banker or a local mortgage broker and get pre-qualified for a loan. They'll tell you how much you can afford. It's a great time to buy - good luck!
Web Reference:  http://www.cindihagley.com
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