Why do home affordability calculators come back with such a small number?
When I enter information into a calculator on any website that offers them, it comes back saying I can only afford to pay a mortgage of 300ish a month. I currently pay almost 700 a month in rent and I’m fine, and I could pay higher and still be FINE. Where are they coming up with this? If I were to go talk to a loan officer at a bank, would they do something similar and only approve me for a very low amount? I mean, I could probably pay the amount their saying I could afford 3 times in a month.
A little info here. I was calculating the gross income (which would include myself and my fiance together) at about 3500, total debt payments required each month at 500 (not including mortgage/rent related expenses). And the number it came back with in the 300s. Someone please enlighten me, maybe I’m missing why they think I’m so destitute. I’m really only trying to be approved for a 110,000 loan. Also eligible for VA loan if that helps.
Every mortgage professional I have talked to (over 20) says that your total housing payment should be 35% or less of your gross monthly income. That would mean that your principal, interest, taxes, and insurance should be $1,225. Which, depending on taxes and insurance, means you can afford a $120,000-$140,000 house (also depending on your down payment).
CNN Interview Jon Shibley President of Lenox Financial
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