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I Am Purchasing a Home In Phoenix, AZ. Can I Afford It?

How much mortgage money can I qualify to borrow if I live in the Phoenix Metro Area?

Without a doubt, this is typically the number one question mortgage professionals are asked by new clients in Phoenix.

Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.  Or in other words, what do they ***want***and what do they***need***in their home.

In other words, what makes for a comfortable long-term mortgage payment?

The Quick Answer:

If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.

Sample Mortgage Scenario:

Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio:

$3000 multiplied by .3 (30%) = $900 max monthly mortgage payment

This means that your mortgage payment (Principal, Interest, Taxes, Hazard Insurance) cannot exceed $900 a month.

“Ballparking” a Qualifying Loan Amount:

Simple step:  We use a safe average of $7 per month in payment for every $1000 in purchase price so…

Step 1)  $900 a month divided by $7 = $128.50

Step 2) $128.50 multiplied by 1000 = $128,500 loan amount.

Remember, these are average ratios and guidelines set by most lenders for common mortgage programs.

Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well.

Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for.

Other items to consider in your monthly budget:

1. Make sure you are using all of your monthly bills
2. Arte you a co-signer on any other loan or family loans
3. Do not overlook any short-term expenses – medical, auto repairs, travel, emergencies
4. Plan on additional expenses for the home such as water, electric, maintenance, etc…
5. Don’t forget about yourself, keep a cushion for savings and financial planning

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January 31, 2010 by · Leave a Comment

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About Patrick

My name is Pat and I have been a member of Signature Home Loans since 1993. I have experience in all facets of the mortgage industry including Manufactured Homes, Conventional, FHA Mortgages, VA Mortgages, Jumbo Loans, Investor Loans, Reverse Mortgages and Second Mortgage Loans.

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