Mortgage Guidelines “CENTS”
The true cost of homeownership goes far beyond a house’s asking price. Be prepared to fork over thousands of additional dollars in interest, closing costs, repairs, renovations, maintenance, insurance, taxes, utilities and more. Not to mention the money to furnish your home as well.
Obviously, you’ll want to ensure you can afford homeownership before you close on a mortgage. Here are some general rules to keep in mind:
• Make sure your total monthly housing payment doesn’t exceed 28% of your gross monthly income, the amount you make before taxes are taken out.
Take your annual household income and divide that number by 12 to determine your gross monthly income. Then multiply that number by 0.28 to determine your maximum monthly housing payment.
THE LOW-DOWN ON DOWN PAYMENTS
One of the most important financial decisions you’ll have to make early on in the home-buying process is determining how much of a down payment you can
afford. Some lenders offer low or no down payment options, but putting down 20% of the home’s purchase price is ideal. If you put down less than 20%, you will need to pay PMI (Private Mortgage Insurance).
Be sure to include insurance, property tax, etc. These can really add up and need to be included in your total monthly housing payment budget.
• Your total monthly debt payments (including your mortgage and any other debts such as an auto loan or student loan) should not exceed 36% of your gross monthly income.
28%
HOUSING DEBT
28% OF PRE-TAX INCOME
36%
TOTAL DEBT
36% OF PRE-TAX INCOME
Before you start looking for a home, make sure you're on firm footing financially online with our mortgage payment calculator. Do your homework online – calculate payments, learn key terms and understand the process. Visit our online Mortgage Center.
