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Old 02-13-2007, 02:03 PM   #1
Padge
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Default Whats the best way to figure out the mortgage you can afford?

I currently rent at $1250/mo and am selling my car, so I could pay up to $1750/mo and still be comfortable.

Problem is I have no idea what that translates to in terms of mortgage. On average, can I afford a 200K mortgage? More or less?

Does anyone know the best way to figure a rough estimate?
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Old 02-13-2007, 02:07 PM   #2
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http://partners.leadfusion.com/leadf...ome01/tool.fcs

Fool with the numbers till you get what you want.
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Old 02-13-2007, 02:07 PM   #3
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Quote:
Originally Posted by Padge View Post
I currently rent at $1250/mo and am selling my car, so I could pay up to $1750/mo and still be comfortable.

Problem is I have no idea what that translates to in terms of mortgage. On average, can I afford a 200K mortgage? More or less?

Does anyone know the best way to figure a rough estimate?
You can probably afford a $200k mortgage, whether a bank will lend it to you though, is a different story.
They'll look at your credit history etc and they will likely have a limit (%) of your gross income that would limit the amount they would lend you.
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Old 02-13-2007, 02:10 PM   #4
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Less than 36% of income

IBWRXVTsaysthatsnotenough
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Old 02-13-2007, 02:11 PM   #5
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^36% before or after tax?
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Old 02-13-2007, 02:12 PM   #6
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The "rule of thumb" I've heard for first time homebuyers, is that after taxes, insurance, mortgage, etc; you should expect to pay 1% of the value of the house every month. Now Determining if you can afford that is a question of risk you are willing to take. Some people will suggest that you spend up 50% of combined income on monthly payments, where I would take the conservative and do 1/2-1/3 of a single income.

YMMV
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Old 02-13-2007, 02:13 PM   #7
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Old 02-13-2007, 02:14 PM   #8
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Quote:
Originally Posted by Padge View Post
^36% before or after tax?
Gross
http://www.bankrate.com/brm/news/rea...004/afford.asp
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Old 02-13-2007, 02:42 PM   #9
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Take into account property taxes, PMI if you don't have 20% to put down, association dues if it's a town home, and home owners insurance.
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Old 02-13-2007, 02:56 PM   #10
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You should really do a search on this. Not being an ass, but this is well covered material and you will find lots of info.

Get used to the term PITI. Stands for Principal, Interest, Taxes, and Insurance. Most planners estimate that all that combined shouldn't be more than 28-33% of your monthly gross income. If you make a lot of money than you could probably spend a larger percentage of your gross income on PITI, than if you make less. There are lots of online mortgage calculators that you enter the home price, interest rate, tax rate, est. insurance payment and it will calculate monthly PITI for you, and even give you an idea on how much income you need to be able to afford it in general terms.

Let's say you put 20k down and are financing 180,000 of a 200,000 house:

At a 30 year 6.5% mortgage, your monthly PI payment is $1137.72, add your local property taxes and insurance payment and there's your monthly PITI.
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Old 02-13-2007, 02:57 PM   #11
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Buying a house you can actually afford is so oldschool!
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Old 02-13-2007, 03:00 PM   #12
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^I dont know what I would do if I bought a house I couldnt afford... it would suck.
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Old 02-13-2007, 03:01 PM   #13
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Quote:
Originally Posted by elucas730 View Post
Less than 36% of income

IBWRXVTsaysthatsnotenough
i'm staying away from this one
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Old 02-13-2007, 03:10 PM   #14
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Add up all your current bills (except rent/mortgage and power of course), expenses for food, gas, entertainment you will not give up, amount for savings, etc. Then add at least $100 a month more savings for that furnace or roof you will need soon. From what you have left subtract the average homeowners insurance payment, and power for the house your looking at (different for everyone); what is left is what you can afford.
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Old 02-13-2007, 03:15 PM   #15
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Don't forget to calculate how much montly utilities will cost in the house. Utilities bills can very greatly from one house to the next. Also realize you'll need things like yard equipment, furniture, etc.

I assume this is your first house. I'd suggest looking into if your state has any special programs for first time home buyers.
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Old 02-13-2007, 03:18 PM   #16
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Quote:
Originally Posted by StevesGT View Post
PMI if you don't have 20% to put down
A good mortgage broker should be able to tell you ways to avoid PMI. In our case, we got a 80/15/5 mortgage. The benefit is that we needed only 5% down to get into the house. Both mortgages are at a fixed rate, with the 15% one at a higher rate. Interest on both mortgages is tax deductible (AFAIK PMI isn't). The downside(?) is that we can't take out a line of credit/home equity loan, but the upside is that the total bill is less than if we had financed 95% and put down 5%, and had to pay PMI.

Also, if you have PMI you might be able to make it go away early if you can demonstrate that you have the required equity in the house, from appreciation, for example.

There are other splits that can be done depending on your situation, and in some situations you may be better off going with the loan+PMI.
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