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Me and my wife have a combined income of roughly 100k annually and are interested in buying a house. We have both been at our current employment for over 2 years. I looking for a cut and dry answer, no percents of income. Her credit score is above 700 and mine is around 610 (old debts paid and in the rebuilding stage now) We have 8000 to put down so will be looking into a FHA loan. We have roughly $ 800 in bills each month. We want a fixed rate for 30 years. So how much home can we affard and what will the monthly payments be including insurance, taxes, mortgage insurance an anything else that my be figured into the monthy payments?
the average tax amount in the area we are looking is $ 4000 and we have saved a total of $ 18000 but only want to put $ 8000 down. So we will have reserve money and money to to help furnish the house since this will be our first home.

2 Thoughts on How much home can I afford in houston and what will the monthly payment be?
  1. Reply
    September 3, 2011 at 2:50 am

    You’re kind of demanding when asking for free advice, my friend. It’s not cut and dried, but I’ll try to explain anyway.

    Find you monthly gross income. Divide the monthly debt by the monthly gross. This is your debt to income ratio. Now the debt ratio we allow is determined by a combination of things, including your credit scores, income, and your income. This is done by desktop underwriting. Each lender has it’s own scorecard built into desktop underwriting. As an underwriter, I can only guess, but there are not enough credit scores to even do that. You need all 6 credit scores. I’ll give you an example: Let’s say your scores are 610, 620 and 710. It’s not unusual to have 100 point spread because one of the bureaus using a different system. And say your wife’s are 680, 700 and 720. Desktop underwriting would line all those up like this:

    610 620 710
    680 700 720

    We’d look at the middle score and use the lower one. In today’s world the 710 is only an “ok” score, not a good score. With a lower middle score of 620, we’d probably allow you about 35% to
    40% debt ratio. So 800/8333 = around 10%. 8333 * .4 = 3333. 3333 – 800 = 2532. That’s about what we’d allow for your house payment, using my numbers. That’s the total payment, including principal, interest, taxes and insurance.

    Here’s a mortgage calculator to use:

    There’s a lot of calculation to go into this and frankly, I’m not really willing to do it all for you. What interest rate will you be able to get? The taxes and insurance will depend on the house, the neighborhood, the insurance company, and the mortgage insurance may depend partly on your credit score. Maybe not, I’m not sure if FHA does that. There’s no way to estimate that if I lived in Houston, which I don’t.

    Look at an MLS listing for a house around $ 200,000 to $ 225,000 in the area you want. That should put you in the FHA ball park. The listings usually have the taxes and insurance on them. Put the loan amount (purchase price – down payment) into the calculator and use the rate that’s already there. It’s pretty close to a current rate. Did the $ 8000 include your closing fees and reserve, or do you have more money stashed for those? You need a couple months reserves that have been hanging around your bank account for a few months.

    Where I live you can get a very nice house for $ 200k. I have no idea what you’d get in Houston.

  2. Reply
    real estate guy
    September 3, 2011 at 2:58 am

    first, percentage of income is the way it works.

    You have asked what you can afford. This is up to you. It’s the not the same as what you qualify for. Usually you qualify for more then what you can afford (based on other expenses, area you live and lifestyle).

    What you qualify for: usually they will go to 32% of your gross monthly income for total housing

    100000/12=8333 a month. using 32%, you could have a payment of 2666 a month. At a 30 year fixed rate at 5% you could have a mortgage of around 400000. This would require a 3.5% downpayment of $ 14,000 PLUS CLOSING (which you can ask the seller to pay).

    What I recommend is to NEVER spend more then 25% of your gross income on housing and force yourself to save 10% EVERY MONTH.

    Based on 25% 8333×25%=2083 mortgage = 314,000 mortgage plus your 3.5% down = sales price.

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