Buyer's Edge, Inc. - How Much Can I Afford?

The First "Exclusive Buyer Agency" in Houston
(est. as a Buyer's Agent in 1989)

Before you begin your search for a home,
you must answer one major question:

Determining a price range that you're comfortable with requires a lot of thought. To be accurate you must define your income, maximum down payment, monthly mortgage payment and the loan amount for which you qualify. You may qualify for a higher monthly payment than you want to spend. Only you can determine your comfort zone. However, following the simple steps below will help you estimate the amount you qualify for.

ESTIMATE YOUR INCOME

Add your annual gross income (before taxes) with that of your spouse (if applicable) to get your combined annual gross income. Divide your total annual gross income by 12 to get your combined monthly gross income.

CALCULATE YOUR DOWN PAYMENT

The amount of your down payment depends on how your transaction is structured and the desired type of financing. Typically, lenders will accept loans with 5% to 20% of the total purchase price as a down payment. Generally, loan amounts of less than 20% will require mortgage insurance (MI) be included in the loan requirements.

ESTIMATE A MONTHLY PAYMENT YOU CAN AFFORD

As you review your financial picture and monthly budget, you will want to calculate how much you will be able to afford for your total housing payment including principal, interest, taxes and insurance.

The mortgage industry typically uses two rules of thumb in determining the Buyers financial qualifications, and they are:

A) The total monthly payments for the home mortgage should not exceed 28% of your monthly gross income.
B) Your total house payment and long term debts should not exceed 36% of your total gross monthly income.

EXAMPLES:

If your gross monthly income is $5,000.00 then the maximum you should pay according to rule (A) is $5,000.00 X 28% (.28) = $1,400.00.

If your gross monthly income is $5,000.00 then the maximum you should pay according to rule (B) on house payment and long term debts is $5,000.00 X 36% (.36) = $1,800. If your long term debt (i.e. car loan, etc.) is $350 a month, then your monthly payment should not exceed $1,450.00. NOTE: These figures are a rough estimate. The ratios vary between 25% and 41% depending on the mortgage company, type of loan and other requirements of a particular financial institution.

FILL IN THE RED BLANKS BELOW TO ESTIMATE THE MONTHLY MORTGAGE AMOUNT YOU CAN AFFORD (your browser must be form and javascript compliant).

What is your combined annual gross income? $

Divide your annual gross income by 12 to determine monthly gross income. $

Monthly debt as calculated using Rule (A) and Rule (B) $ $

No debts; as described in Rule (A) $ 0.00

With debts; enter amount of long term monthly debts described in Rule (B) $

Total Amount of Buyer Qualification $ $

Rule A Rule B

What is your combined annual gross income?		$
Divide your annual gross income by 12 to determine monthly gross income.		$
Monthly debt as calculated using Rule (A) and Rule (B)	$	$
No debts; as described in Rule (A)	$ 0.00
With debts; enter amount of long term monthly debts described in Rule (B)		$
Total Amount of Buyer Qualification		$	$
		Rule A	Rule B

For more information, call us at (713) 355-EDGE (3343)
or e-mail us at edge@buyers-edge.com

Licensed Texas Real Estate Broker
Member of Houston Association of Realtors
Buyer's Edge, Inc. · 50 Briar Hollow Lane · Suite 296W · Houston, TX 77027

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