Income vs Payments - a schedule of what you can afford

Income vs Payments - a schedule to what you can afford

Here is a simple schedule of the payments that a conforming bank says that you can afford when they look at your income. This schedule is based on the gross income, not what you bring home. These numbers are not as scary as they sound, in fact the following schedule makes it easy to see where you and you paycheck actually fit in.

If you are looking for a general idea of what kind of payment you can afford and what size mortgage that will get you, this schedule gives you that, a general idea. Please talk to myself or another mortgae professional to consider your entire financial picture before making a decision to buy a home.

Rather than just giving you percentages, you can follow down the chart to compare what you make versus the payment you can afford and the total monthly payments you have on the mortgage plus you car payment and any credit card bills.

Although a bank will consider a number of factors when considering whether to give you a loan, the most important thing they look at is whether you have the ability to fulfill your obligation to them. This is a function of your income and debt levels. In order to help make that decision, the banks have come up with two ratios called the "housing ratio" and the "debt ratio."

Housing Ratio
Conforming Lenders want to see your monthly housing expense as 28% or less of your monthly gross income. This includes your principle and interest of your mortgage plus taxes and house insurance. Hence the term PITI.

Debt Ratio
The banks want to see this number at or below 36% of your monthly income and includes everything in the housing ratio plus your other obligations. These can be credit card payments, car loans and child support.

Payment Chart
As you look at this chart, remember that you should fit into both categories to afford that home.

In addition, remember that the housing costs column is your total mortgage payment. This includes the principle and interest on your mortgage, and any taxes, insurance and PMI.

The size of mortgage column gives you an idea of the size of the mortgage you may qualify for assuming that taxes, insurance and PMI are approximately 25% of the mortgage payment and an interest rate of 6.5%. There are many factors that go into the size of the mortgage, but this will give you a genereal idea.

Gross Monthly Income	Housing Costs Allowed	Total Debt Allowed	Size of Mortgage
2,000	560	720	$66,000
2,500	700	900	$83,000
3,000	840	1080	$99,000
3,500	980	1260	$116,000
4,000	1120	1440	$133,000
4,500	1260	1620	$149,000
5,000	1400	1800	$166,000
5,500	1540	1980	$182,000
6,000	1660	2160	$197,000
6,500	1800	2340	$213,000
7,000	1940	2520	$230,000
7,500	2080	2700	$247,000
8,000	2220	2880	$263,000
8,500	2360	3060	$280,000
9,000	2500	3240	$296,000

Don't Fit?
There are other ways to qualify for that home you really want, but remember that any time you step outside of the above guidelines, you will pay the bank for stretching the limits, either in points and/or interest rate.

I have programs available that allow you to extend that ratio up to 50% of your monthly income and while I do not suggest that you buy any home that stretched you so far, there are situations where you cannot prove some of your income that make these programs attractive to certain borrowers.

These numbers are only a general guideline to help you get an idea of what tha bank considers when making the decision on granting a mortgage amd I strongly suggest you speak with me or another mortgage professional before using these numbers to make a decision on buying a home.

However, since there are a lot of options and programs that are available, give me a call or
fill out the information request form and I will be happy to discuss your options with you.

Harry Smith email Harry@dailyinterest.com or reach me by phone Office 1-248-548-7655 Cell 1-248-514-9000	Drew Smith email drew@dailyinterest.com or reach me by phone Office 1-248-548-7655 Cell 1-248-703-7770
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