How Much Mortgage Can You Afford
(New Jersey, USA)
Time out! How much mortgage can you afford? Keep in mind as you read the following letter from John, it is your mortgage and your home. Don't get caught in the trap believing if a lender qualifies you for a higher mortgage payment that you can afford it.
Hi Kate, My good friend needs $155,000 mortgage for a divorce settlement.
- The home is being valued at $325,000
- She has no mortgage balances or other debts
- Annual property taxes are about $9,000
- Her gross annual income is $40,000
- Child support will be around $1,100 month
- Her credit score is 800
I need to find the best configuration of a loan for her such as an interest only 10/20 fixed as well as 30 year fixed rate mortgage.
I think she can afford about $1,300 per month in PITI (the mortgage payment including property taxes and home owners insurance) given other expenses of running a household with 3 kids.
Kate Answers: How Much Mortgage Can You Afford
Hi John, Here is the most important question to keep asking your friend. How much mortgage can you afford?
Affordability is not to be confused with qualifying for a mortgage. With an 800 credit score and borrowing less than 50% of her appraised value, it is a pretty safe assumption that loan approval should not pose a big obstacle.
But only a homeowner knows the monthly house payments she can afford.
In fact, she may be offered a greater sum of money than she originally asked to borrow. And herein lies the danger for any homeowner... assuming the lender has an inside track to calculating affordability.
So I will repeat this...
Lenders determine how much you are qualified to borrow based on one-size-fits-all guidelines.
But you determine how much you are comfortable borrowing based on what is affordable to YOU.
John, please make sure your friend reads How Much Mortgage Can You Afford
because mortgage companies won't be responsible for the ongoing monthly house payments. She will be!
I hope you'll come back to my website again in the future. Of course, all of my information is free.
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