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The first question that most Realtors and mortgage brokers will be asked is HOW MUCH CAN I AFFORD? In other words, what is the Maximum Total Loan Amount and the Maximum Monthly Payment that I can afford?
This question is easily answered when the applicant provides the following information:
- Gross Annual Income(s)
- Total Monthly Debt Payment (revolving credit debt)
Please determine, where applicable, the Total Monthly Payment for the following: Automobile(s)-Loan(s)/Lease(s), Personal Loans, Credit Lines, Leases, Credit Cards, Department Stores, Appliance Stores, Furniture Stores, Gas Credit Cards, Student Loans and Support Payments. DO NOT include monthly Utility Costs, Rent or Mortgage Payments, Insurance and Cable/Satellite Costs.
Your Realtor or mortgage broker will provide you with the current interest rates (STATED ANNUAL RATES), based on the TERM selected, assist you with deciding how long it will take to pay off your mortgage (AMORTIZATION), and provide you with a good estimate for annual property taxes, annual heating costs and monthly condo fees, if applicable, for the type of property that you are considering.
EXAMPLE:
A couple have determined that their respective Gross Annual Incomes are $ 32,500.00 and $ 36,725.00, their combined Total Monthly Debt Payment (revolving credit debt) is $ 735.00 and that they want to buy a condominium.
Their Realtor has provided the following information about the costs associated with the condo unit that they are considering buying. Annual property taxes $ 2,165.00; heat $ 1,350.00; monthly condo fees $ 278.00.
Their Realtor has recommended an Amortization of 25 years and a 7 year Term at an interest rate (Stated Annual Rate) of 5.15%.
Answers: Based on the above data this couple can afford a Maximum Total Loan Amount of $ 193,262.42 and a Maximum Monthly Payment of $ 1,140.58.