What Percent of my Income Should be Devoted to My Mortgage Payment?

home-buyers-mortgage-paymentBefore purchasing a home, it’s important to determine the percentage of your income that you will be able to dedicate towards your mortgage. The first step is to assess your current income and outstanding debt and make an accurate but conservative estimate about the amount of house you can afford. Asking the question “What’s my mortgage payment going to be is a great place to start!”

Mortgage Calculators

If you’re using an online mortgage calculator, it’s likely operating on a front-end ratio. This means they’re measuring your gross income rather than net pay to determine what amount you can dedicate toward your mortgage. You’ll often find that online mortgage calculators use 28 percent of your gross income. However, other things to be considered besides the principal and interest on your mortgage payment include property taxes, mortgage insurance and home insurance.

Back-End Ratio

A back-end ratio may be more beneficial for helping to determine a potential mortgage payment if you are carrying a significant amount of debt. The back-end ratio considers your current ongoing debts such as student loans, credit cards, child support, mortgage payments, etc. when determining your potential mortgage payment. This ratio has a standard 36 percent debt-to-income ratio in the mortgage industry.

Percent of Income

When assessing the amount of your income that will be used toward your mortgage, the mortgage product, your credit and a down payment are influential factors. Begin by determining your ideal debt-to-income ratio. Your total debt-to-income ratio includes your housing payment (mortgage, homeowners insurance, property taxes) and your existing debts.

Helpful Tips

We highly recommend that your mortgage payment not exceed 31 percent of your monthly gross income. As far as your total monthly payment obligations (mortgage, student and car loans, child support, etc.), these should not exceed 43 percent of your monthly earnings.

VA Loan Benefits

For home buyers qualified for a VA loan, no down payment in necessary. For more information on qualifying for a VA loan or to get pre approved, contact Midwest VA Loans today.

Are VA Loan-Financed Homes Harder to Sell?

VA-loan-financed-sellActive military members and military families are often facing relocations. Due to this, its often asked if having a VA loan limits the ability or right to sell their home.

The assumption is that having a VA home loan imposes special conditions which lock you into your property and disable the right to sell the home. Fortunately, this assumption is untrue. Va Loans and regular mortgages are similar in the fact that you can sell at any time.

Whether you’re selling to upgrade to a bigger home or due to PCS, homeowners with a VA loan-financed home may want to one day sell. When it comes to selling your home financed by a VA lender, there are several options.

One option is to allow an eligible home buyer to assume the VA Loan and the associated payments. Another option is to have the prospective buyer take out a new loan to pay the balance of the existing loan. Either option allows the seller to fully restore their VA entitlement so that they may use their VA loan benefits when purchasing their next home.

By having the home buyer pay the loan balance, the seller is given peace of mind knowing that the existing loan is paid in full instead of worrying about the purchaser being irresponsible with payments.

In the case that the purchaser is assuming the VA loan, benefits to the seller include low closing costs, no appraisal or repair requirements and reduced overall processing. Of course, this option requires the purchaser to be eligible for a VA loan and qualify with the lender for the assumption process.

 

Have questions about selling your VA loan financed home or about getting pre approved for a VA loan? Contact Midwest VA Loans at 816-875-6392.