Let’s assume you have pretty good credit (620 or above) and you have a job with a steady income. Now, your next question is, “How Much Home Can I Afford”? The following is meant to be a guide only.
Let’s follow an example. You make an annual gross salary of $65,000. That’s a gross monthly income of $5416.00. Remember, we said that your mortgage payment should be no more than 30% of your gross monthly income. In this example, your mortgage payment should be no more than $1624/month. This $1624/month includes: Principle, Interest, Taxes, and Insurance, commonly known as PITI. Let’s assume in this example that your taxes and insurance amount to $250./month, which leaves $1624 – $250 = $1374/month for the “PI” (principle and interest).
Interest rates, today, are hovering around 5.0% or less for a 30 year, fixed mortgage. Interest rates are at their historical lows right now. Using the following chart, at 5%, your interest rate factor is 5.37.
Do the following the calculation:
$1374 / 5.37 = $255 x 1,000 = $255,000 mortgage (P and I only)
Making $65,000/year, you probably can afford a $255,000 home — that’s a lot of home these days in Gwinnett County, GA and there are plenty of wonderful homes for sale in that price range. Another item not factored into this equation is your down payment. So, depending upon how much you are putting down, the price of the home may be more than $255,000.
| Interest Rate Factors Per $1,000 |
Interest
Rates |
Term
15 Years |
Term
30 Years |
Interest
Rate |
Term
15 Years |
Term
30 Years |
| 4 |
7.40 |
4.77 |
8 |
9.56 |
7.34 |
| 4 ¼ |
7.52 |
4.92 |
8 ¼ |
9.70 |
7.51 |
| 4 ½ |
7.65 |
5.07 |
8 ½ |
9.85 |
7.69 |
| 4 ¾ |
7.78 |
5.22 |
8 ¾ |
9.99 |
7.87 |
| 5 |
7.91 |
5.37 |
9 |
10.14 |
8.05 |
| 5 ¼ |
8.04 |
5.52 |
9 ¼ |
10.29 |
8.23 |
| 5 ½ |
8.17 |
5.68 |
9 ½ |
10.44 |
8.41 |
| 5 ¾ |
8.30 |
5.84 |
9 ¾ |
10.59 |
8.59 |
| 6 |
8.44 |
6.00 |
10 |
10.75 |
8.77 |
| 6 ¼ |
8.57 |
6.16 |
10 ¼ |
10.90 |
8.96 |
| 6 ½ |
8.71 |
6.32 |
10 ½ |
11.05 |
9.15 |
| 6 ¾ |
8.85 |
6.48 |
10 ¾ |
11.21 |
9.33 |
| 7 |
8.99 |
6.65 |
11 |
11.36 |
9.52 |
| 7 ¼ |
9.13 |
6.82 |
11 ¼ |
11.52 |
9.71 |
| 7 ½ |
9.27 |
6.99 |
11 ½ |
11.68 |
9.90 |
| 7 ¾ |
9.41 |
7.16 |
11 ¾ |
11.84 |
10.09 |
Another way to use this chart is to say, I’d like to buy a home for $120,000. Keeping this example simple, let’s assume you put nothing down, zero down, so your mortgage is $120,000. At 5%, 30 year fixed mortgage, your payments would be
$120,000 x 5.37 = $644.40 (Principle and Interest) / Month
Please remember to use this only as a guide as I have simplified it for the example only. If you think you are ready to find your dream home in Gwinnett County, GA, contact me at 770-356-4656 or joan.boudreau@kw.com. I will get you in touch with one of my mortgage specialists and let’s get started. Not sure where your down payment will come from, still call me because there are down payment assistance programs that are available to you!
all short sale buyers were first-time buyers.
