Monthly Housing Expenses and Home Affordability
When you are looking to purchase a home it is very important to stay within your budget. You need to know what you can comfortably afford without spreading yourself too thin. Your monthly housing expense often referred to as PITIA, include principal, interest, taxes, insurance and association dues. To figure out your monthly housing expenses, you take your PITIA and divide by your gross monthly income. That number should be 33% or less in order to qualify for a loan with most lenders.
Most mortgage lenders want a borrower’s housing expense ratio to be 33% or less because it is a good indication of a borrower’s ability to make timely payments on their mortgage. Lenders will look at your housing expenses combined with your total expenses, if they feel that your debt-to-income ratios are too high you are likely to be denied for a loan. It is easy to avoid such a problem by having your finances in order and knowing what your potential housing expenses should be.
Budgeting is extremely important. Keep track of what you spend and be sure to stick to what you can afford. It is important to know your gross monthly income; your housing expense ratio is based upon it. All loans are different however, and all homebuyers are in different situations. Heather Giordano, underwriter for United Home Loans, states, “While every type of loan (Conventional, Government, Jumbo) has a basic set of guidelines, there are numerous factors that can affect the allowable debt-to-income ratio. These factors can include but are not limited to property type (condominium, townhouse, multi-unit, single family), loan-to-value, type of pay (i.e. self-employed, commission, salaried, hourly, bonus), credit score and reserves (remaining assets after the actual closing takes place). It is important to speak with a licensed loan originator to help navigate the guidelines and to determine your maximum allowable housing payment.”
If you have any questions about your monthly expenses or DTI ratios and how they may affect your home buying ability please contact United Home Loans at (708) 531-8388