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House mortgage calculator with utilities12/27/2023 Most lenders prefer borrowers with a DTI of 36% or less.įor example, let’s say that you earn $5,000 per month and these are your monthly expenses:įrom there, you’d divide your monthly expenses ($2,000) by your monthly income ($5,000), giving you a 40% DTI. To qualify for a mortgage, try to keep your DTI as low as possible. If you’re applying with your spouse, include both your incomes and debts in this calculation. To calculate your DTI, you’ll divide your monthly debt payments - loans, credit cards, alimony and child support - by your gross monthly income to get your DTI percentage. This figure helps lenders assess your financial health when evaluating your loan application. Your debt-to-income ratio shows lenders how much you make each month compared to how much you spend on debt. Other conventional loans might also require processing or origination fees. USDA loans require an upfront and annual guarantee fee, while VA loans require an origination fee. Conventional loans require PMI and FHA loans require a mortgage insurance premium, or MIP - both of which have upfront and annual costs. When you put less than 20% down on a home, you’ll be required to purchase a form of mortgage insurance. Your closing costs typically include taxes, home appraisals, inspections, attorney fees, title insurance and other miscellaneous fees. When you close on your new home, you’ll likely have closing costs ranging from 2% to 5% of your total mortgage amount. If you secure a USDA or VA loan, you may be exempt from providing a down payment. Down paymentĭepending on your loan type, expect to pay between 3% to 20% upfront. Buying a home comes along with many upfront costs that you’ll want to consider when shopping for a home. This affordability calculator can help you determine how much of a home you can afford, but that doesn’t mean you should look for homes for the maximum amount in your price range. Down payments, closing costs, mortgage insurance and other fees These amounts are the upper limits of what you should plan on spending - if possible keep these costs under the 28/36 thresholds. You should also aim to keep your total monthly household debt under $1,800 (or 36% of your pay). That includes your mortgage, credit card payments, car loans and student loans.įor example, if you make $5,000 per month (before taxes), using the 28% rule, you could safely spend up to $1,400 on your housing expenses. This rule also says that you should keep all of your household debt under 36% of your gross monthly income. So what is the 28/36 rule? This simple rule of thumb says that you should spend a maximum of 28% of your gross monthly income - that’s your salary before any taxes or deductions come out - on housing-related expenses, such as your mortgage payment, principal, interest, taxes, private mortgage insurance and homeowners dues. Not only can this rule give you insight into your overall financial health, but many lenders use it to determine whether you’re a good loan candidate. You can quickly gauge how much you can safely spend on a mortgage and other debts by using the 28/36 rule. If you want to figure out how much your monthly payment will be instead, check out our mortgage calculator. The formula used is: Monthly payment = (income x DTI) – debts – tax – insurance. Finally, the calculator subtracts your other estimated monthly expenses, such as property taxes and homeowners insurance, to determine your monthly housing budget - and the total home price you can afford. It uses your monthly income and your current monthly debt payments to calculate the monthly payments you can afford to stay under a target debt-to-income ratio. This calculator uses your ZIP code to estimate a property tax rate, and your credit score to estimate a mortgage interest rate. How our mortgage affordability calculator works
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