How much home can I afford to buy?
What mortgage payment would fit into my monthly budget that has other financial obligations to meet? There are some that just don't know for sure what a bank mortgage home loan underwriter would say is the magic number when buying a home. Others who know they don't care how high the "loan arranger" says they can afford but tie it to what they are already paying for rent.
A lot of renters are paying way way beyond the monthly lease installment they technically can afford.
Fixing this, mowing the lawn, paying for utilities that should be on the house meter but that are not. The worry for a home buyer about property taxes, property insurance and upkeep can make the house payment be a small part of the obligation. Many renters are just over spending, paying more than they can afford for their rental units which makes the cushion of extra cash missing in their wallet or purse. And that's why so short on closing costs or getting behind on other payments when something unexpected comes up needing immediate attention. It used to be one flavor or local home loans too, that involved a hefty twenty five percent down payment or forget even trying to get a house mortgage.
So back to the headline of the blog, the question about how much home can I afford? The two rules of thumb batted around if everything is equal is one week's paycheck allocated to housing. Or the other real estate axiom is two and a half times your yearly salary. I prefer to gravitate to the one quarter of your monthly income. So money is left over for other essentials like groceries, house repairs, kid's braces, family entertainment, credit cards, car paymentets etc. Here is one debt to income calculator to fill in the numbers and run some financial scenarios.
The debt to income ratio is just as important as a good credit score and paying your bills on time month after month.
The debt to income ratio is the percentage of your gross income required to cover your housing and debt payments. The lower your debt-to-income ratio the easier to carry your debt load will be. A low debt-to-income ratio increases the odds that you will be able to meet your monthly obligations and not miss any of the payments. This debt to income ratio and your credit score are the two most important factors used by creditors when extending home loans and offering additional credit in lending exercises.To much debt and the odds proven by the numbers if the debt ratio gets too high means everyone loses.
Calculators for buying a home in Maine.
You need to know more than just what is my monthly house payment going to be if the loan is this long a term for the mortgage at this particular interest rate. Debt ratios on how much you make, how much you spend now and what this new home payment is going to weigh in at is part of the mortgage home loan underwriting.