Mobile: (520) 313-0352    Email: ypalmer11@gmail.com
Yvette M. Palmer, Associate Broker
AGAVE PREMIER PROPERTIES
How Much Can I Afford
Getting an idea as to the price of the home you can afford is an important first step in the home buying process. By understanding the price range you can afford, you can look for real estate in the appropriate areas and pinpoint the ideal home.
 
As well as, the type of loan you have been pre-approved will determine what the right home for you will be. Below is a mortgage shopping toolkit, loan terms, and an affordability calculator that will provide helpful information to help you get a better real estate price point.

Know before you owe - mortgage shopping toolkit

The Consumer Financial Protection Bureau (CFPB) released the following toolkit that guides consumers through the process of shopping for a mortgage and buying a house. Developed as part of the CFPB’s “Know Before You Owe” mortgage initiative, the toolkit helps consumers take full advantage of the new Loan Estimate and Closing Disclosure forms that lenders are required to begin providing in August of 2015.
 

AFFORDABILITY CALCULATOR

The affordability calculator is calculated based on the percentage of your income spent on monthly debt. Most lenders limit how much of your monthly income can pay debt such as mortgage payments, car loans, and student debt (this is called Debt to Income ratio). The conventional limit is 36% of your monthly income, but this could be higher for FHA loans. Your remaining income after debt and taxes should be enough to cover living expenses and savings goals. It is also wise to have cash set aside to pay for any large unexpected repairs or financial emergencies.
 

Mortgage TERMS and DEFINITIONS

ANNUAL INCOME
This is the combined annual income for you and your co-borrower. Include all income before taxes, including base salary, commissions, bonuses, overtime, tips, rental income, investment income, alimony, child support, etc.
 
DOWN PAYMENT
This is the amount of money you will put towards a down payment on the house. Make sure you still have cash left over after the down payment to cover unexpected repairs or financial emergencies.
 
MONTHLY DEBT
Include all of you and your co-borrower's monthly debts, including: minimum monthly required credit card payments, car payments, student loans, alimony/child support payments, any house payments (rent or mortgage) other than the new mortgage you are seeking, rental property maintenance, and other personal loans with periodic payments.
  
Do NOT include: credit card balances you pay off in full each month, existing house payments (rent or mortgage) that will become obsolete as a result of the new mortgage you are seeking, or the new mortgage you are seeking.
 
INTEREST RATE
This is the interest rate for the loan you will receive. By default, the current 30-yr fixed average rate on Zillow Mortgage Marketplace will be used.
 
DEBT TO INCOME (DTI)
Your DTI is expressed as a percentage and is your total "minimum" monthly debt divided by your gross monthly income. The conventional limit for DTI is 36% of your monthly income, but this could be as high as 41% for FHA loans. A DTI of 20% or below is considered excellent.
 
INCOME TAXES
This is an annual tax that governments place on individuals' income. It includes federal tax, most states and some local entities. The national average is around 30% but can vary based on income, location, etc.
 
PROPERTY TAXES
The mortgage payment calculator includes estimated property taxes. The value represents an annual tax on homeowners' property and the tax amount is based on the home's value.
 
HOMEOWNERS INSURANCE
Commonly known as hazard insurance, most lenders require insurance to provide damage protection for your home and personal property from a variety of events, including fire, lightning, burglary, vandalism, storms, explosions, and more. All homeowner's insurance policies contain personal liability coverage, which protects against lawsuits involving injuries that occur on and off your property.
 
MORTGAGE INSURANCE (PMI)
Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. It protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Also known as PMI (Private Mortgage Insurance).
 
HOA DUES
Typically, owners of condos or townhomes are required to pay homeowners association dues (known as HOA fees), to cover common amenities or services within the property such as garbage collection, landscaping, snow removal, pool maintenance, and hazard insurance.
  
LOAN TERM
This is the length of time you choose to pay off your loan (e.g., 30 years, 20 years, 15 years, etc.)
 
ADVANCED REPORT
Click on the Advanced Report link to see a printable report that includes mortgage payment breakdowns, total payments, and a full mortgage payment amortization calculation (table and chart). Amortization table includes ability to view amortization by year or by month.
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