Ready To Go House-Hunting? Before we hit the streets and find your perfect home, you need a good sense of how much house you can afford. Fortunately, Dallas is a very affordable city for housing and I know some fantastic mortgage bankers and brokers who can make your home dreams come true.
To determine how much house you can afford we need to determine your qualification ratios to see how much they will lend you. Although every lender uses slightly different ratios, most are within the same range to determine your home affordability.
First, your Maximum Monthly Mortgage Payment should not exceed 28 percent of your gross monthly income (your income before taxes are taken out). For example, if you and your spouse have a combined annual income of $100,000 (that's a monthly income of $8,333), your mortgage payment should not exceed $2,333.
Your Maximum Total Housing Payment (including the mortgage, insurance, homeowner fees and property taxes) should not exceed 32 percent of your gross monthly income. So for the same couple, their total monthly housing payment should not be more than $2,666 per month.
Your total Maximum Monthly Debt Payments including your house, car and student loan payments combined with your credit card payments should not exceed 40 percent of your gross monthly income. So if if you have a big car payment or a lot of credit card debt, you won’t be able to afford as much of a mortgage. Often banks won’t approve a mortgage until you reduce some of your debt.
You should have a down payment of at least 10 to 20 percent of your home purchase price. Keep in mind that if you put less than 20 percent down, your lender will required you to pay private mortgage insurance (PMI), which will increase your housing expense and decrease how much house you can afford.
Use the handy Mortgage Calculator on the right side of this site to determine the monthly payments of your dream house. I'd suggest using a property tax rate of 2.5% for the Dallas area.
And call me when you're ready to buy your home!
