How to check if I can afford a mortgage?

The house is for sale for $150000.00 and I have $10000.00 for down payment. I'm making $1700.00 (net) a month and have no other debt (car and student loans are paid off). The taxes on the new house will be around $1400.00 per year and the heating around $120.00 a month. If I choose to rent an apartment it will cost me around $600.00 + utilities. Can I even get a mortgage alone? What is considered a good interest rate? What are other major costs I should know about when buying a house for the first time?

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  • Bob
    Lv 6
    9 years ago
    Favorite Answer

    Being approved and being able to afford are two different things. At a 4.25% 30 year fixed FHA loan your $10K would probably cover your down payment and closing costs and result in a total house payment of just about $1000 per month. That is probably 42 -45% of your gross monthly income which is approaching the upper limit but if you have a good credit history you would likely be approved. You may do a little better on the rate but I'm trying to be conservative.

    Even though you could be approved, a 45% debt ratio does not leave much for repairs, maintenance or going out to dinner once in a while. Unless you have additional savings that could cause problems if your refrigerator stops refrigerating or something else goes wrong. Your car isn't going to last forever either, and eventually you may need a new one that will likely mean another loan.

    Going for max financing may be OK if you are very disciplined with your money and your income is likely to be going up. Otherwise you'll be able to sleep better at night with a a bit less of a mortgage.

    Source(s): Licensed Loan Officer in Ohio
  • 9 years ago

    Google:

    How much home can I afford.

    Remember never go by the max if you want to be able to save for a car, take vacations, dine out, save for kids college, or save for retirement.

    First step is to get your credit reports at

    Annual Credit Report.com

    Never get scammed into paying for them.

    Reports are free - always have been.

    Make sure they are in perfect condition - with no credit card debt.

    Then make an appointment at any bank and get pre-approved for a morgage.

    A realtor will not give you the time of day without this letter.

    There is not cost for this service from banks - because they think you will choose them.

    Get a book from your library or bookstore called:

    Homebuying for Dummies

    .

  • 9 years ago

    If you're in the USA, you need 20% down to qualify for a home mortgage unless you qualify with the aid of PMI (Private Mortgage Insurance) which is expensive. So if the amount of the LOAN is $150,000 you would need $30,000 as a down payment.

    To find out if you qualify for less with PMI included, you would need to check with a mortgage lender as that also has to do with your credit score and how long your credit history is.

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