Brenda Wilson's ERA Kokopelli Real Estate®

What Can You Afford?

What Can You Afford?
Brenda Wilson's ERA Kokopelli Real Estate®

What Can You Afford?

To be considered for a mortgage, you generally have to meet two conditions before there's even a credit check:

  1. You must be able to handle the monthly payments of principal, interest, taxes, and insurance (PITI).

  2. You must have an adequate down payment.

Although the criteria for these vary, you can get a rough idea of what many lenders think you can afford from the worksheet below. Find out what are the prevailing rates, required down payment percentages, and loan terms. Then fill in the blue and grey blanks and look for the answers in green.

Column A Column B
Annual income before taxes $
divided by the number of months ÷ 12
Monthly gross income = =
Many lenders will not allow you to spend more than 28% of your monthly gross income on housing expenses × .28
Monthly Housing Expense Allowance (B) =
Many lenders allow 36% of monthly gross income for long-term debt × .36
Long-term monthly expense allowance =
Figure out your monthly long-term obligations below (this must be subtracted from the allowance):
Child Support $
Auto Loan +
Credit Cards +
Association Fees +
Other +

Total Long-Term Obligations

 -
Monthly Housing Expense Allowance (A) =
Look at the last amount in columns A and B above. We must use the smaller of the two values:
About 20% of the housing expense allowance is for taxes and insurance, leaving 80% for payment of the principal and interest of the mortgage: × .80
Available monthly mortgage (PI) expense: =
Divide by your estimated monthly mortgage payment per $1000:  (See this chart) ÷
=
× 1,000
Affordable mortgage amount (what the lender will lend): =

In addition to the mortgage you borrow from a lender, normally you will be required to make a down payment, a percentage of the purchase price you must pay in cash. A down payment could be almost any amound depending upon the requirements of your lender and the type of loan you are applying for. You can afford a house that is the total of your affordable mortgage amount plus the down payment and closing costs.

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Kokopelli Real Estate™

Brenda Wilson

brendawillsell@erakokopelli.com
1301 N. Richardson, Roswell, NM 88201
Office: (575) 627-7700
Fax: (575) 627-7707
Toll Free: (866) 384-7700

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