Your mortgage lender is chiefly concerned with your ability to
repay your mortgage. To determine if you qualify for a loan, we’ll consider your credit history, monthly gross income, and how much cash you'll be able to accumulate for a down payment (which generally runs anywhere from 5 to 20 percent of the home’s purchase price).
So, how much house can you afford? You can easily calculate the answer using two standard debt-to-income ratios (here is a Mortgage Calculator that will calculate how much house you can afford):
1. The housing expense, or front-end ratio, shows how much of your gross (pretax) monthly income would go toward the mortgage payment. As a general guideline, your monthly mortgage payment, including principal, interest, real estate taxes and homeowners insurance, should not exceed 28 percent of your
gross monthly income.
To calculate your maximum housing expense, multiply your annual salary by 0.28 and divide by 12(months).
2. The total debt-to-income, or back-end ratio, shows how much of your gross income would go toward all your debt obligations, including mortgage, car loans, child support, alimony, credit card bills, student loans, and condominium fees. In general, your total monthly debt obligation should not exceed 36 percent of your gross income.
To calculate your maximum allowable debt-to-income ratio, multiply your annual salary by 0.36 and divide by 12 (months).
Example: Let's consider a home buyer who makes $40,000 a year. The maximum amount available for a monthly mortgage payment at 28 percent of gross income would be $933. However, the total debt payments each month should not exceed 36 percent, which comes to $1,200.
Try this Affordability Calculator
Do make loan and other debt payments on time, especially over the months leading up to the filing of your mortgage application. It sounds simple, but every 30-, 60- or 90-day delinquency on a loan or credit card will reduce the credit score the lender ends up considering at of the loan file. That score, in turn, will determine the quality of a loan you get -- if you get one at all.
Kitchen remodels historically provide a significant return on investment, but you shouldn’t lose sight of practicality and designing to your personal style. Make sure your kitchen works for you by answering the following questions before beginning any remodeling project:
Don’t fall prey to a designer’s vision that doesn’t match your own. You have to live with your new kitchen, so make sure it's exactly what you want.
If you seek financing for a remodel or a new home purchase, or you know someone who does, please allow me to put my expertise to work for you. Call today to set up a consultation so we can discuss the possibilities.