home | search | email  



Metts Company Realtors
Sandy Metts & Associates
502-894-0300
800-640-4632
How Much Can I Afford?

Talking with a mortgage officer will give you the firmest answers regarding what a lender will loan you for a mortgage. Your Metts Company Realtors agent can also give you a ballpark estimate if you provide her with information about your monthly income and debt.

But if you prefer the do-it-yourself approach, making the following calculations will give you a ballpark estimate of the monthly payment and mortgage amount that your income will support.

  • Calculate your household’s gross monthly income - before deductions.
  • Multiply your gross income by 36% (income X .36) - this number is referred to as your debt ratio.
  • Subtract long-term monthly debts (more than 10 monthly payments remaining), such as car loan payments, personal loans, child support, alimony or regular payments to a credit card company. Do not include rent or your current mortgage payment.
  • Next, multiply your gross income by 28% - this number is referred to as your housing ratio. Determine which number is smaller - the housing ratio or the debt ratio minus long-term debts. The smaller number is the amount of monthly income that can be dedicated to a monthly mortgage payment.
  • To qualify buyers for a mortgage, lenders require ratios of, on average, 28/36. The first number in the ratio means that the maximum mortgage payment you qualify for could be up to 28% of gross income; the second number means that the maximum mortgage payment plus monthly debt could be up to 36% of gross income. If monthly debt totals more than 8%, the maximum mortgage payment would be reduced accordingly. The required ratios may be reduced or increased by individual lenders based on factors such as the amount of down payment or the type of loan.
  • Calculate the average annual real estate taxes in your area and estimate the annual cost of homeowner’s insurance. Add the two numbers and divide by 12 to obtain a monthly figure for taxes and insurance.
  • Deduct the monthly cost of taxes and insurance from monthly mortgage payment calculated above. The result is the amount that can be dedicated to principal and interest on a mortgage loan.
  • The table below shows what mortgage amounts will be supported by the listed monthly payments at several different interest rates. The mortgage amount plus the down payment you intend to make would determine the maximum purchase price of your new home.


    Monthly
    Payment (PI)
    5%
    6%
    7%
    8%
    9%
    10%
    $ 600
    111,800
    100,100
    90,200
    81,800
    74,600
    68,400
    800
    149,000
    133,400
    120,200
    109,100
    99,450
    91,200
    1,000
    186,300
    166,800
    150,200
    136,400
    124,300
    114,000
    1,200
    223,500
    200,150
    180,200
    163,700
    149,150
    136,800
    1,400
    260,800
    233,500
    210,200
    191,000
    174,000
    159,600
    1,600
    298,050
    266,900
    240,200
    218,300
    198,850
    182,400
    1,800
    335,300
    300,200
    270,200
    245,600
    223,700
    205,200
    2,000
    372,600
    333,600
    300,200
    272,900
    248,550
    228,000

4014 Dutchmans Lane * Louisville, KY 40207
Phone: 502-894-0300 * 800-640-4632
Fax: 502-895-6369


Copyright 2002 - Metts Company Realtors - All Rights Reserved

 

[ home ] [ contact ] [ buying ] [ selling ] [ relocating ] search ]