Many loan programs may allow you to qualify for home financing with a higher debt ratio that what is calculated from this sheet. Other factors such as credit, down payment, reserves (money in the bank) and other factors may also affect how much of a mortgage you will qualify for.
Print this page for ease of use!
Follow each following step to see approximately how much of a house payment you will qualify for.
A – What is your Monthly Gross Income? $_________________
Income BEFORE taxes
Salaried – Divide yearly salary by 12.
Hourly – hourly pay <times> average hours worked per week <times> 52 <divided by> 12.
Self Employed – Schedule C net income. Add back in Depreciation and interest, divide by 12.
B – What are your monthly debt payments? $_________________
Include consumer debt minimum payments such as; car, credit cards, student loans, gas cards, Store charge cards, etc.
DO NOT include; house or apartment rent, utilities, cell phone, insurances
C – Multiply your monthly Income (“A” above) by .41% $_________________
This is what your total payments can be including house and all debts. For example; if you make $3,000 per month this is what you would do: 3,000 x .41 = 1,230
D – Subtract monthly debts (B) from total payments (C) $_________________
This is what you will qualify for a total house payment
E – To calculate house payments click here. There is a calculator on the front (home) page or to the left on this page. However you can use the basic calculations below:
For every $10,000 in house payment your payment will about:
5% interest rate = $54
5.5% interest rate = $57
6% interest rate = $60
6.5% interest rate = $63
7% interest rate = $67
7.5% interest rate = $70
8% interest rate = $73
It won’t be exact, but it will get you close.
For example: A $200,000 dollar loan at 6% interest would be:
200,000 New loan amount, divided by 10,000 (factor used above) = 20
20 multiplied by $60 = $1,200 (house payment)
* Important Note: The calculation above is for Principal and Interest only. However, the mortgage calculator at the left will include property taxes, homeowners insurance and Mortgage Insurance. Taxes & insurance will vary by each home. Check with your Real Estate agent or property owner to find out how mcuh the property taxes are. Check with your insurance agent to find out how much the homeowners insurance may be.
Mortgage insurance: For an FHA loan, the monthly factor is .85 (when downpayment is less than 5%) or .80 when downpayment is 5% or more. Conventional loans will depend on your credit score, down payment and other factors. Use the default of .54 to get an idea of how much it will be but remember the MI may change once all of your information is obtained.
To find out exactly how much you can qualify for and to receive a real loan approval, contact Ron Pippin!
** Another Note – above calulations are for illustration purposes only. I am not quoting current interest rates and is not intended as an offer to lend. (the legal disclaimer stuff )