Wednesday, Mar. 9, 2004

 

How much house can you afford?

According to Gary Marshall, broker at Assist 2 Sell Buyer & Seller Realty Center, before you go out looking for property, you need to figure out how much house you can afford.

It is fairly simple to “pre-qualify” yourself. When you go to buy a house, you will have to get a loan. The mortgage companies and banks use what they call debt ratios to figure out how much home (or loan amount) you can afford. They have two debt ratios they go by.

First, basically, they do not want your monthly house payment by itself to be more than 28 percent of your monthly gross (before they take out for taxes). As an example, lets ay you gross (before take out) $4,000 per month. Take 28 percent of $4,000. That equals $1,120 per month. This would be your maximum allowable monthly house payment. Take 28 percent of your gross monthly income to figure out the maximum allowable monthly house payment that they will allow for you.

They also look at your total monthly debt ratio, too. Your total monthly debt would include such things as your monthly car payment, credit card payment, school loan payment, and any other reoccurring monthly payment debt. They don’t want your total monthly debt ratio to be more than 41 percent. Using our $4,000 per month as gross income example, your total monthly debt (new house payment, car payment, credit cards, etc.) should not be more than $1,640 per month. Make sure all your total monthly debt (including the new house payment) is less than 41 percent of your monthly gross income.

These are just some basic guidelines. This is enough to give you some idea of what you can afford. There are many variables. There are also many gray areas.

What if you have an extra part-time job? Does that count? Well, maybe. How long have you had the part-time job? Over a year? Are you guaranteed a certain amount of hours every week?

What if you receive child support? Does that count? Again, maybe. Do you have a long track record where you can prove you have received the child support on a regular basis?

And,how much longer will you be receiving the child support? What if you are self-employed? You may be required to provide two years tax returns as proof of your income.

Because of all the variables and gray areas, you really need to talk to a qualified, competent loan officer to discuss your particular situation.

The Assist 2 Sell Office in Peachtree City would be glad to recommend a friendly, knowledgeable loan officer to help you at no cost or obligation. Getting pre-qualified by a loan officer only takes about 10 minutes over the phone. There’s no pressure. It’s fast, quick, simple and easy. Also, be sure to ask us for a free report entitled, “How to shop for a lender.” Assist 2 Sell will get the report right out to you with no cost or obligation.