![]() There are other expenses, including property taxes and mortgage insurance. So what does this amount to for a monthly payment? To know that, you’ll want to factor in more than just your monthly mortgage payment. With current interest rates lingering in the 3% range, this will put you in the ballpark of affording a home worth $267,800. Now let’s assume you’ve got around $30,000 for a down payment and have a good credit score. ![]() Let’s take the aforementioned example, where you make $6,000 a month and pay $500 in debts. Once you know your income and debt, you can plug those numbers into a home affordability calculator to see how much house you can afford while still remaining below that 36% debt-to-income ratio. That’s well below 36%, but then again, you don’t own a home yet. Divide $500 by $6,000 and you have a debt-to-income ratio of 0.083, or 8.3%. Let’s say, for instance, that every month you’re paying $500 to monthly debts and pulling in $6,000. Once you have that number, divide that amount by your monthly income. Here’s how to figure it out: Calculate how much your monthly payments go toward debt-that’s things like car payments, credit cards, and student loans (rent should not be included in this calculation). ![]() ![]() This is essentially a way for you (and lenders) to compare your monthly income with how much you owe-and how a house can fit into that picture.Īs a general rule, your debt-to-income ratio should remain below 36%, says David Feldberg, broker and owner of Coastal Real Estate Group in Newport Beach, CA. One of the most basic equations you can use to figure out home affordability is your debt-to-income ratio. We’re on the case! Here’s how to find that magic number for you. That way, you can shop within your price range-because let’s face it, nothing’s more of a downer than finding your dream home only to discover after the fact that it’s out of reach.Īll of this means that before you start checking out houses, it’s good to determine from the get-go what home price you can afford, including what the mortgage payment would be and how much you need for a down payment. Nonetheless, for your own sanity, it’s smart to take charge of coming up with an affordable figure for a down payment, and your monthly mortgage payments. ![]()
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