When people decide to buy a home, the monthly payment is a crucial factor. Conservative underwriting for mortgage payments state that borrowers should allocate no more than approximately 30% of their income for a house payment. Looked at from another perspective, this means if your monthly income is $4,000, you should keep your mortgage payment under $1,200 a month.
How much home can you afford?
Affordability is a function of home price, interest rate and down payment.
Here’s a simple formula that drives that point home…
In simple terms, every 1% increase in home loan rates decreases the buying power of an individual by 10% in home price. This means that if you qualify for a home priced at $200,000 today and interest rates increase 1%, the amount you could qualify for would be reduced to approximately $180,000 to maintain the same payment.
As always, I’d be happy to answer any questions and help calculate any scenarios that can help you determine what you can afford or save in today’s market. Just call or email me today.
Donna Holmer is a Branch Manager & Senior Loan Officer for Diamond Residential Mortgage Corporation in Merrillville, IN. Feel free to contact Donna at 219 682 4208 or email her at Donna.Holmer@TheDRMC.com.