• How Much Mortgage Can I Afford?

    July 14, 2017
  • How Much Mortgage Can I Afford?
    How Much Mortgage Can I Qualify For?
    What Mortgage Can I Afford?

    These are some of the biggest questions asked in the mortgage business.  The amount of mortgage one can afford is based on two things:
    1.  Debt to income ratio
    2.  Mortgage product

    The debt to income ratio is a math equation dividing your income by 12.  I.E. $60,000 per year = $5000 per month.  Now if you have a car payment of $500 per month and your prospective mortgage payment is $1500 month = $2000 total / $5000 income = 40% debt to income ratio.  We use monthly debts reporting on your credit report such as student loans, car payments, credit card payments and so on.  This does not include health insurance, cell phone payments, car insurance and any other items not reporting on your credit report.

    The mortgage product is a conventional, FHA, USDA, VA or other type of loan.  The type of loans offer different debt to income ratios such as some banks only allow 43% as some mortgage brokers will allow up to 57% and FHA has a higher allowable ratio than conventional and VA has the highest allowable debt to income ratio.  This is something you would want to speak to a mortgage professional about but doing the calculations on your own is very much possible to analyze how much you can afford!