John asked me, “What price range do I qualify for?”
Before home buyers hit the streets to shop for homes with their realtors, buyers are required to meet with a mortgage lender and get preapproved. Answering John’s question should be a simple answer. It’s not.
Take two people with the exact same income, assets and debts and they will differ on the amount they want to spend each month on housing. One couple wants the home of their dreams and is willing to shop at the top of their price range to purchase their forever home. They are comfortable living a meager life style now for the right home. Compared to John, he wanted food with his meals, be able to afford furniture and be able to take vacations.
If you want to stretch your budget take 45-50% of your total gross income and that’s the amount you have left to pay your mortgage and your monthly debts. Keep in mind Uncle Sam takes money too.
Planning to furnish your new home? Purchase at 36% of your gross monthly income to cover housing and your monthly debts.
I worked with John to figure out a budget and the amount of monthly payment he felt he could afford. After all, I an tell John what he qualifies for, but I’m not the one making his house payment.
FYI: From my experience…the most conservative home buyers purchase under 25% of their gross income.
Equal Housing Lender.