• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sonoma County Mortgages

Contact Us About Mortgage Financing

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now

Search Sonoma County Mortgages

  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • About SCM
  • About Scott Sheldon

Primary Sidebar

Sonoma County Mortgages is a part of New American Funding

New American Funding - NMLS #6606

Get Your Latest Rate Quote Now!

Here is the magic cash to payment formula to use when buying a home

April 28, 2019 by Scott Sheldon

Share on Facebook Share on Twitter Share on Pinterest Share on LinkedIn Share on Email
end of the year best time to buy a home reasons

Buying a house is a large financial investment. People when seeking a mortgage generally are looking to keep their payments as low as possible in relationship to their income and fixed costs. Here’s what you should look for when deciding how much cash you want to put in your home buying project…

The general rule of thumb for purchasing a property is that for every $100,000 of spending power that’s about $625 a month of payment with today’s mortgage rates in the mid 4% range. This means that the opposite also holds true let’s say for example you’re purchasing a property and you’re putting down 5% just because you’re trying to purchase a house and keep your cash as liquid as possible, one way to offset the amount of cash in relationship to payment is to look at multiple scenarios.

For example, if you have the cash to put down say an extra hundred thousand dollars based on your financial means you should look at the overall cost-benefit. What’s the cost of taking the extra money and using it for a down payment?

What’s your return on that additional down payment cash if your return is greater to keep that money in the bank liquid, then do that however with today’s overall low rates it’s probably almost nine times out of 10 more beneficial to put the extra $100,000 down on your payment increasing your return on that down payment capital.

An experienced and competent lender can run that math for you to show you what that would look like in relationship to a housing payment. So, $100,000 extra down payment is going to lower your monthly mortgage payment to the tune of about $625 per month.

This relationship from payment to cash also relates to other monthly expenses. Let’s say for example that you have a car payment at $600 per month well that car payment at $600 a month is $100,000 of spending power in relationship to income. Put another way the BMW that you’re financing at $600 a month might prevent you from being able to purchase is $600,000 house pigeonholing you into a $500,000 house. Any realtor will tell you $100,000 in spending power can dramatically change the scope of the neighborhood that you’re looking to purchase, the area, the location, property size, bedroom size, bathroom size etc. $100,000 in a real estate transaction is almost always night and day difference between one property versus another in other words, it’s big.

So, for every $100,000 it’s about $625 a month payment, that also means that for every $50,000 of cash or spending power that’s going to relate to $312.50 per month of payment the same logic and relationship applies. A consumer debt at $300 a month is $50,000 of spending power and so on.

The question you need to ask yourself when deciding to purchase a house and trying to manipulate your borrowing power is can I get rid of consumer debt to increase my borrowing power? Same thing conversely if you’re at a certain monthly mortgage payment based on your monthly income can you change your income and or get a cosigner? Those are ways to increase your borrowing power. For most families when they’re buying a home paying off a consumer debt will yield them a payment allowing them to do more with their individual finances. That may mean looking at bigger priced homes, lowering payment if they take that extra cash or paying off debt or paying down that principal balance freeing up payment and spending power.

Looking to buy a home? Get a no cost quote now.

Related Mortgage Advice from Scott Sheldon

  • Are there any no down payment loans for home buying any more?

    Yes, although slightly limited. Without any down payment, you'll most likely be looking at one…

  • fannie mae debt to income ratio change
    Can You Borrow A Down Payment To Buy A Home ?

    Planning to buy a home sometime soon? If you're working on the down payment, know…

  • saving to buy a home
    How saving plays a role in your home buying plan

    Saving up to buy a home is no easy feat. Here's what you should take…

  • Buying a home can be a puzzling process
    Why Renting May Delay Your Home Buying Efforts

    Renters everywhere are feeling the constraints of rising rents. Rising rents erodes your ability to…

Filed Under: First Time Home Buyers, Interest Rates, Loan Programs, Loan Qualifying, Mortgage Shopping Tagged With: BAD CREDIT MORTGAGE, buying your first home, how to buy sonoma county real estate, qualifying for a mortgage, sonoma county home buying, SONOMA COUNTY LOANS

Get Sonoma County Mortgages News and Updates in Your Inbox

Footer

SCM on Facebook

SonomaCountyMortgages.com

Connect on Facebook

SCM On Instagram

Follow Sonoma County Mortgages on Instagram

Follow on Instagram

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

See Reviews on Zillow

Location & Contact

Sonoma County Mortgages and New American Funding are an Equal Opportunity Housing Lender

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
2455 Bennett Valley Road C107
Santa Rosa, CA 95405
1-707-217-4000
View SCM Map | Email Us!

Map of Sonoma County Mortgages New American Financing Office

View Map on Google

Copyright 2010–2023 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing (Opens in New Window) | Privacy (Opens in New Window)
Terms of Use (Opens in New Window) | Electronic Consent Agreement (Opens in New Window)
Opens in new window Opens an external site Opens an external site in a new window