Constants:
G.M.I. = Gross Monthly Income
Allowable front-end ratio = 33%
Allowable back-end ratio = 45%
Price of house = Sell Price
Loan Amount = L.A.
Monthly Loan Payment = mLp
Down Payment = Dp
*Up to 12% of G.M.I. can be used for revolving monthly payments.
- Credit cards, child support, alimony, car payments, student loan’s
Credit scores under 740 have restrictive factors that need to be accounted for.
FHA loan guidelines are a lot easier to qualify for then non-government insured loans.
Closing costs on FHA and Conventional loans are about 3% of sell price.
Formulas:
I gross $85,000 per year how much can I qualify for total?
((Income / 12) = (G.M.I.) / 3 = what you can qualify for, in a mLp)
(mLp x 12 /.09 = L.A.)
Example ($85,000yr / 12 = $7,083mo / 3 = $2,361mLp x 12 / .09 = $314,814L.A.)
How much do I have to make per year to qualify for this $500,000 house?
(mLp x 3 = G.M.I.) - What you need to gross per month to qualify for mLp.
(Sell Price – Dp = L.A. x .09 /12 = mLp)(mLp x 3 = Gross Monthly Income needed to qualify)
Example ($500,000price - $20,000Dp = $480,000L.A. x .09 / 12 = $3,600mLp x 3 = $10,800G.M.I.)
How much house can I qualify for if I can afford $2,000 per month?
(mLp x 12 / .09 = L.A.)
Example ($2,000mLp x 12mo / .09 = $266,666L.A.)
How much house can I qualify for, if I can afford $3,000 per month?
(mLp x 12 / .09 = Sell Price)
Example ($3,000mLp x 12mo / .09 = $400,000L.A.)
Definitions:
Front end ratio - The amount of your gross income that is used towards your total house payment.
(P.I.T.I + HOA + Melloroos + M.I.)
-Should not exceed 33% of gross income.
Back-end Ratio – All your revolving monthly payments combined and divide by your gross income
-Should not exceed 45% of gross income.
Thanks,
Brent DeWitt
