When it comes to a mortgage payment, there’s no set price or calculator that can determine how much you should be paying. While many websites would like to assume that you are buying a house with zero debt, a stable well-paying job and perfect credit, life just isn’t that perfect most of the time. Whether it be student loans or a switch in careers, there are still ways to find the right mortgage payment that will help you decide which home to buy. Here is how to determine how much you should be paying for your mortgage.
Basic Rules of a Mortgage Payment
When you obtain mortgage pre-approval, you’ll most likely be told that you can afford payments up to 30 to 35 percent of your pretax income. While this is exciting to hear, it doesn’t necessarily mean that you should take on a more expensive home. Many professionals say that your mortgage payment should be equal to one week’s paycheck, which is generally 23 percent of your monthly income. This way you can afford food, gas, clothes, and other emergency situations that may arise. It’s more responsible to opt for a smaller home with a smaller down payment or to wait and save up more money until you can afford a larger payment.
Mortgage Payment with Debt
Your debt to income ratio will determine whether or not your lender will believe you can afford a mortgage loan. By examining your front-end ratio that ranges between 28 and 31 percent, you’ll be able to qualify for a conventional or FHA loan. Your back-end ratio has to be under 36 percent to qualify for a conventional loan and under 41 percent to qualify for a FHA-backed loan. Essentially this means that if you keep your mortgage payment below 25% of pretax monthly income and your total debt payment below 33% of pretax monthly income, you can afford buying a home. There are other factors considered for your ability to manage a property such as how long you’ve had your job, how big your down payment is, and if your income has been gradually increasing over the past couple years.
Mortgage Payment Assistance
Nothing makes this process easier than having a professional by your side guiding you in the right direction. This applies to those who are paying off student loans, child support, or credit card bills. If you feel that you’re financially responsible enough to balance debt and monthly mortgage payments, working with an experienced real estate agent is the best way to ensure you’re not searching for homes outside of your budget. CENTURY 21 Northwest Realty has an objective to always help their clients get into a home that fits their needs personally and financially. With the right advice and referral to a reliable lender, you can be moving into your ideal home in no time!