Using mortgage qualification calculators when we currently own and are looking to sell and buy a new home...?? Any suggestions??

Asked by Erin Mcmanus, Boston, MA Sun Jul 3, 2011

If we are looking to move (i.e. buy a new home and sell the one we are currently in), does anyone know what the stipulations are of qualifying for a mortgage? When entering info into mortgage calculators should we be including our current mortgage as a monthly expense, or will we not be approved for as much if we don't sell our current home before we buy a new one?

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Andrew Adams, , 01915
Sun Jul 3, 2011
If you plan to buy before selling, you will have to carry both mortgages. Your current mortgage will be part of your total monthly debt. Odds are you would qualify for more if you sold before buying.
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John Dean, Agent, Boston, MA
Mon Jul 4, 2011

I always advise my clients to seek a mortgage professional to answer that same very question you pose. A good mortgage professional will run multiple scenarios with or without the sale of your current home. This will give you a true and accurate picture to start your home search. I know several that would review your current question free of charge. Please let me know how I can help.

If you are looking for something quick I have a free mortgage calculator on my website as well.
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Louis Wolfs…, Agent, Needham, MA
Sun Jul 3, 2011

Speak with a good loan officer. Typically as a rule of thumb I use 30 to 35 % of your income as a quide and divide it by the interest rate you feel is available. It will give you a quick idea of what you could qualify for assuming no other debts. As to your present home it would not come into play as to an expense unless you wanted to own both homes at once. Typically sellers do not like to take offers subject to a sale of a home unless they have been unable to sell their's
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Susan Murie, Agent, Cambridge, MA
Sun Jul 3, 2011
The best thing to do is contact a mortgage broker who will run your numbers and give you a clear picture of what you can be pre-approved for. I have not had any buyers unable to get pre-approved because they currently have a mortgage but check in with a mortgage professional so you have all the correct information for your particular scenario.
I work with Mona Wong at Monument Mortgage because I value her work ethic and knowledge.
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Thomas von Z…, Agent, Cambridge, MA
Sun Jul 3, 2011

You are wise to consider the financial aspects first before you embark on your journey to find and buy a new home. There are several things to be aware of.

First, lenders typically qualify you on the basis of two ratios. The so-called primary ration is established by taking your total monthly expense for the new home (mortgage principal and interest, as well as property taxes, homeowner's insurance or condo fees as the case might be, and mortgage insurance if it applies) and dividing it by your combined gross monthly pretax income. That percentage is your primary ratio. Many conventional lenders qualify buyers on primary ratios ranging between 28% and 38% depending on how much you put down, your credit scores, etc. For instance, if your lender qualifies you on a primary ratio of 33%, then in order to qualify for the mortgage, the entire monthly payment may not exceed 33% of your gross monthly income before taxes.

The second ratio used by lenders encompasses ALL of your fixed monthly obligations, and include the house expenses mentioned above as well as any long term obligations, i.e. car loans, student loans, alimony payments -- anything that will take more than six months to repay. This ratio, known as the secondary or back ratio is typically in the 38% to 45% range, and included in this ratio would be your monthly expenses for your old home.

So yes, in answer to your question, if you keep your old home, it may have a limiting effect on how much you can finance when you buy the new home.

You may however be able to partially offset the limiting impact of your old home, by renting it out. Typically, lenders are willing to take 75% of the actual rent you are receiving on the home, and add that to your monthly income, thus lowering the secondary ratio somewhat and allowing you to qualify for a higher loan for the new home.

In general, if you put down more than 20% on the new home, you will have less restrictive lending guidelines to deal with and will have an easier time financing the new home. Put down 25% and it becomes even easier.

Please keep in mind, that this information is general in nature, and not meant to be specific. Lending guidelines have been changing so rapidly over the last two years, that even experienced lenders are constantly updating their information to keep up with changing underwriting guidelines.

I have been using two lenders a lot, and they have both been excellent at providing accurate information. You can try either one, although there are many other knowledgeable loan officers in the area as well.
I have been using

Rob Veneziano
Senior Loan Officer
Greenpark Mortgage Corporation
140 Gould Street
Needham, MA 02494
617.797.7995 - direct
781.726.6757 - fax
NMLS license ID: 38902


Amy Tierce
Fairway Independent Mortgage
18 Crawford Street
Needham, MA 02494
Direct: 781-719-4665
Fax: 781-719-4684
MLO License # 15695

You may also find the following link helpful, which will allow you to calculate mortgage payments on a variety of lender's programs. You can adjust the calculation parameters to fit a specific house. Just by way of a disclaimer, there are other reliable and good programs out there as well.…

I hope this helps! Good luck on the house hunt!

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Nichole Book…, Agent, Cambridge, MA
Sun Jul 3, 2011
If you have a smart phone there are many mortgage calculator apps (many are free!) that can guide you with an idea of a mortgage cost. It will never be 100% but I have many clients that find them useful. You can also go onto (mortgage broker with a great website) and you may find a mortgage calculator that will help you as well. Good luck and happy 4th!
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