Determing Home Affordability and an Estimate of What You can Qualify for.
Typical home loan guidelines do not allow for the total housing expense, plus debt to exceed 49.9% of gross income. Lets take a look at a simple example for;
- Home buyer’s earning combined income of $150,000 annually.
- Own 2 cars with total monthly payments of $895.00.
- Credit card debt of $25,000 with minimum monthly payments of $1,250.00 per month.
$12,500 monthly income. ($120,000 / 12 months)
$6,237.50 available towards total debt servicing of housing expense and monthly debt ($12,500 x 49.9% = $6,237.50).
$2,145.00 Mortgage consumer debt ($895 for cars + $1,250 for credit cards).
$4,092.50 is the total available ($6,237.50 less $2,145.00) to go towards the total Housing Expense (Principle & Interest + Property Tax + Home Insurance plus + HOA).
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