This it depends on all four factors of creating a mortgage, credit, debt, income and assets. Assuming you have the necessary assets for down payment and/or reserves in the bank and your credit score is considered good, let’s look at the meat and potatoes, is there enough income to offset all monthly liabilities?
How the scenario plays out:
Are there any monthly liabilities? If yes, the minimum monthly payment will be calculated for the purposes of figuring out your debt to income ratio. The DTI (for short) is the amount of debt relative to the monthly income used to offset liabilities expressed as a percentage for lending purposes.
If there is no monthly obligations..
Then, you can approximately assume based on an income of $6000 per month/$72,000 annually you would be permitted to take on a monthly house payment of $2700 per month including taxes, insurance and principal and interest. This would calculate out out at a 45% debt to income ratio which is about standard for most mortgage loan programs you’ll find in the marketplace today. You will want to contact the lender at some point for an ultimate pre-approval or loan qualification.
If there is monthly obligations…
Take for example $400 per month which is comprised of child support, a car payment and monthly credit card obligations.
The total monthly house payment used for qualifying would be $2300. This is the total house payment this borrower could take on using these figures.
*Mortgage Tip: because liabilities negatively affect borrowing power or rather how much house payment can be taken out, double every dollar of debt will be needed in monthly income to offset the monthly liabilities. For every $100,000 borrowed its approximately $725 per month in total monthly house payment. So $2700 per month would translate to a purchase price somewhere around $372,000. Contact Scott.Sheldon@nafinc.com today!
