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My fiance an I are looking to buy a home. I am calling a morgage broker tonight to help the proccess. we both have student loans and she has a car loan. our total loans are 135,000 and our gross is 101,420. we have roughly 25,000 put to side for a down payment. We are looking for a house before december so after bills we put the rest in money market. out monthly loan payments total 1,300.

i get mixed reviews from websites of what we can afford, and what banks are going to give us.. what is the broker going to tell us? should we rent till our loans are paid down more? is it wise to since its not an investment?

alcova · Joined: 16 May 2011 Posts: 9 2.65 Dollars($)

The amount you can "afford" per an underwriter will be based on your monthly debt-to-income ratio. So, what are your monthly obligations right now? It looks like your income is 101420/12 = 8451/month.

A rule of thumb is 45% DTI, so 8451 * .45 = 3803/month.

Now, subtract from that your current obligations. (i.e., if you have 300 and 200 a month in student loans, and 300 for a car loan, that is 800 total, and you have 3003 left for your home.)

Whatever is left (say, 3003) will need to cover your Principal and Interest, as well as insurance, taxes, and mortgage insurance (if applicable).

Feel free to contact me directly if you would like more specific help. I'm not sure I am licensed in your state, but I'd still be happy to work though it with you.

tomburris · Posted: Thu Jun 02, 2011 1:12 pm Post subject:

we ont care how much you owe. we care about the payments and how much they are as a % of your income. (we calculate debt ratios with payments, not balances)

gmakerley · Posted: Thu Jun 02, 2011 2:59 pm Post subject:

Indeed, monthly payments are paramount in importance. Honestly, what a broker will tell you is difficult for anyone to predict, as we don't have much to go by to try to predict.
Beware of the 45% ratio cited above; I don't believe you'll find too many lenders willing to go so high in these times, and even if they did, your credit scores are going to be a very large determining factor in how far they'll take your debt load before denying a loan request.

If your joint income is sufficiently high, and your credit scores are sufficiently high, then you'll stand a reasonable chance to obtain the home you'd like. Your cash for down payment is pretty substantial for what we usually see with first-time home buyers; I trust you're not depleting your stash in using this $25K.

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