How Much House Can You Afford?
January 24, 2016
Buying your first home is one of the most important financial milestones of your life. But before you find a realtor and start looking at the new homes for sale in Columbus, GA you need to know your budget. One of the quickest ways to find out how much house you can afford is by using an Affordability Calculator. The basic information you need to plug in to the calculator is your annual income, monthly debts and the down payment you are able to make on a new home.
Your mortgage lender will use qualification ratios to determine the amount they will lend you, the borrower. Each lender uses slightly different ratios with some lending a little more and others a little less. Here are a few rules that your lender will use to help determine just how much house you can afford
The Rule of 28 says that your mortgage payment should not exceed 28 percent of your of your gross monthly income. This is your income before taxes are taken out. If you combined household income is $80,000 then you mortgage payment should not be more than $1,866.
The Rule of 32 has to do with your maximum total housing payment. Your total housing payments include your mortgage, homeowner’s insurance, and private mortgage insurance (PMI), association fees, and property taxes. This should not exceed 32 percent of your gross monthly income. So for the household with the combined income of $80,000 their total monthly housing payment should not exceed $2,133 per month.
The Rule of 40 says that your maximum monthly debt payments including your housing, auto loan, student loan, and minimum credit card payments should not exceed 40 percent of your gross monthly income. That same family with the $80,000 income should not have total monthly debt payments exceeding $2,667. So if you have a lot of debt then most banks will not approve your mortgage until your reduce your debt.
Come check out the beautiful new homes for sale in Columbus, GA today!Tags: new homes columbus, new homes columbus ga, new homes georgia
Categorised in: Community Info
This post was written by Rose Anne Erickson