Figuring Out How Much Monthly Mortgage You Can Afford

To start that computation, visit an online mortgage calculator. It ought to outline all expenses
related to home ownership outside the principal and interest on a mortgage. Private mortgage
insurance, home insurance, real estate taxes, and HOA dues are examples of additional costs.

It's crucial to keep your monthly mortgage affordability in mind when applying for a house
loan. Lenders will use your credit score, income, and other financial information during the
approval process to determine the maximum loan amount you are qualified for; you may
qualify for more than you can afford. Think about how much you should borrow to maintain a
realistic monthly budget for your family.

Once you have that total number, you can determine if it fits within your monthly budget. If not,
then you may have to find a lower-priced house to buy.

28 percent, a good start

The Mortgage Reform and Anti-Predatory Lending Act requires mortgage lenders to determine
that borrowers can reasonably repay a loan. The decision is based on an applicant’s credit, job
stability and income. The law doesn’t allow mortgages to take up more than 35 percent of
monthly income.
Many lenders use more stringent requirements, limiting a payment to 28 percent of monthly
income.

How to do the math

Doing the math on how 28 percent of income equates to dollars is easy: Multiply your monthly
income by 28, then divide that by 100. That number equals 28 percent of your monthly income.
Here’s an example: The median U.S. household income in September 2014 was $51,939,
according to the U.S. Census Bureau. That equals about $4,328 per month in income. Multiply
that by 28 to get $121,191, then divide by 100 to get $1,211.
That $1,211 is 28 percent of the median household’s monthly income.

Beware of other debt

Other debt and expenses, however, may make it difficult to afford paying 28 percent of your
monthly income toward a mortgage.
Credit card debt, a car loan and student loans will also be looked at by lenders, and if they add
up to more than 7 percent of your income you may not qualify for a mortgage that costs 28
percent of your income. Your debt-to-income ratio would be at 35 percent or higher, and a
lender may require you to pay off some debts before approving you for a home loan.

Like this update? As your local real estate professional, I can provide more great tips like this and
answer any real estate information questions you may have. Contact me today for more insights and info

JUAN MESTRE
REALTOR ASSOCIATE

RAISING THE BAR FOR REAL ESTATE SERVICES

CONSIDER: Since I'm not a lawyer but your neighbor's Realtor Associate, you should consult an
attorney and your CPA before making any decisions.
If you wish to find your Home or start your journey toward Home Ownership,
Let’s start working together reach me at 305-776-5677 or register at www.juanmestre.com or email
mestre.j@ewm.com.
Sourced and digested from several locations including but not limited to:
RisMedia for BHHS.com/blog, EWM Realty & my knowledge