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How much could we get for a mortgage

how much could we get for a mortgage


Best Answer: OK, I will buck all mortgage agents right now, and tell you the truthful answer:


I work in the mortgage industry, and until I have a complete application, a credit report, and I lock your loan, I cannot tell you what your payment will be, nor can I tell you how much house you can afford on $1,500 per month.

In addition, with the myriad loan programs out there, a $1,500 payment could be structured in many ways. With a negative amortization mortgage (Option ARM), you might be able to afford $400,000+, but your mortgage principle will go up each month until it equals 110-115% of the original amount. At that point, your loan will be recast and amortized over the remaining life of the loan. You can expect that your payment would increase to about $4,000-$4,500 at this point. Oh wait, you can't afford that. Well, you will just lose your house in a few years.

On an interest-only loan, you might be able to afford something in the $300,000 range. For a fully-amortized payment, you might be looking at $150,000-$250,000 depending on the length of the mortgage.

Oh, but wait! There's more. You will have to pay property taxes and insurance. That means that about 20-25% of your payment goes for these expenses. If that must come from the $1,500, then you must reduce the numbers above by up to 25%. Oops.

If the houses you like are in the $350,000 range, then you cannot afford to buy a house just yet. I would recommend building your savings account

over the next year or two, and then revisit the idea, based on your income at that time.

For now, take the $1,500 per month, subtract your current rent, and put the rest into savings. Let that accumulate over the next year or so, because a lender will want to see that you have at least twice your PITI payment in savings before giving you a loan. In addition, you may need down payment money on top of that.

If you ever run into a month in which you cannot make this deposit into your savings account, thank me, because I just saved your credit rating. This is a good test to see how much you can really afford for a house payment, without the risk.

Don't worry about the market getting away from you. I don't expect to see house prices rising in the next two years to any great degree. You might find a "deal" in the meantime, but keep in mind that so many people are looking for deals, that very few real deals exist in the current market. People just feel like they are paying low prices for houses, when they are actually paying exactly what the market will bear.

Owning a home is the second American Dream. The first is owning a business. I wish you luck in your quest, and I urge you to be prudent in search of this goal.

Good luck to you. I hope that I have helped, at least a little bit.

Source(s): 10+ years in the mortgage and real estate industries. See profile for additional background information.

Category: Credit

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