How Much Can I Afford

How Much Home Can I Afford?                         

Right now, in 2023, getting a mortgage is a bit tough.  Lenders are not as willing to relax any lending rules to get a good customer.  It is just a sign of the uncertain economy and high interest rates.

The rule of thumb for lending says that lenders do not want a mortgage payment to be over 28% of a buyer’s monthly income, or for the buyer to have over 36% debt.  The amount actually depends upon six factors:

  1. Gross income.
  2. The amount of cash you have available for the down payment, closing costs      and cash reserves required by the lender.
  3. Your outstanding debts.
  4. Your credit history.
  5. The type of mortgage you select
  6. The current interest rates.

But, that’s not the whole picture.  You still want to take vacations, buy a new car (or boat), take kids to the waterpark and such.  What you can afford needs to take those expenditures into account.  It isn’t just what the bank is willing to loan.  You need to have a lifestyle too.

Having said that, another method lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the Principal and Interest payment on your new home loan, property Taxes and homeowner’s Insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI. This ratio should fall between 28 to 33 percent of your income, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range, hopefully, lower.


How much will I spend on maintenance expenses? 

You can plan to spend about 1 percent or more of the purchase price of your house, annually on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of home ownership. Newer homes will cost less to maintain than older homes, of course.  A home escrow account for major things like the roof or foundation repair is a good thing to plan for.  In Texas, a roof ages quickly and costs thousands to replace or repair.

When is the best time to buy?

Actually, whenever you are ready to buy and want to be in a home is the best time to buy.    It used to be that the Fall and Winter time were the best times to buy due to reduced prices, but, the market in the North Texas Area has gotten to be year around nowadays and the prices tend to be fairly stable throughout the year..

Where do I get information on housing market stats?
The Texas Association of Realtors website:  TAR  Scroll down to the bottom of the homepage and click on Neighborhood Market Data.

What is Fannie Mae’s low-down program?
Fannie Mae has low-down-payment loans as part of an effort to help more people nationwide qualify for a mortgage.  Fannie Mae’s Start-Up Mortgage will assist buyers with a 5 percent down payment who are at any income level. Yet applicants do not need as much income to qualify and less cash for closing than with traditional mortgages. Borrowers will receive a 30-year, fixed-rate mortgage with a first-year monthly payment that is lower than the standard fixed-rate loan. Freddie Mac, Fannie Mae’s counterpart, also offers low-down-payment loan programs.

How do you determine the value of a troubled property?
Call us!  We can determine its value compared to the surrounding homes and the property’s condition.  214-923-8535.

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