Prequalifications
Establish Your Budget…
Estimating Expenses before Buying Your First Home
YOUR BUDGET can be the most Important Part of Buying a home.
Our Home budget includes a format that covers all aspects of your Life.
We want you to be able to afford Your Home until, you decide to Sell..
A few areas of your budget, that are not usually covered are:
- Moving Cost
- Deposits
- Community assessments
- Anticipated Taxes
- Projected Utilities, depending on sq. footage.& insulation values
- Maintenance of your New or Older Home. Yes! You have to start planning on Maintenance even if you buy a New Home.
If you’re buying an existing home, RCM plans on researching local inspector’s available to project future maintenance cost. Then you will be able to use this information as a negotiating tool with the seller or projecting your future capital requirements.
The RCM online format, will give you access to Mortgage Brokers and Financial Institutes that will guide your decision to finding the right mortgage that meets your Personal budget. Pre-Approval of a Mortgage Commitment will be available. Note Mortgage section:
STEP 1: DETERMINE NET MONTHLY INCOME
GROSS MONTHLY INCOME
| Gross base pay (all wages and salaries other than overtime) | $_____________________ |
| Net profit (from business) | $_____________________ |
| Interest and dividends | $_____________________ |
| Other income | $_____________________ |
| Total Gross Monthly Income | $_____________________ |
PAYROLL DECUCTIONS
| Income tax (federal, state and local) | $_____________________ |
| Social Security/retirement | $_____________________ |
| Insurance (life, health and property) | $_____________________ |
| Other | $_____________________ |
| Total Payroll Deductions | $_____________________ |
Total Net Income $_____________________
Step 2: Determine Monthly Expenses
LONG-TERM MONTHLY OBLIGATIONS (MORE THAN 11 MONTHS)
| Car, #1 | $ ____________________ |
| Car #2 | $ ____________________ |
| Furniture | $ ____________________ |
| Education Loans | $____________________ |
| Other debt | $ ____________________ |
| Other debt | $_____________________ |
| Total Long-term Monthly Debt | $_____________________ |
MONTHLY NON-HOUSING EXPENSES
|
Food, beverages (home and work)
|
$_____________________ |
|
Transportation/auto expenses
|
$_____________________ |
|
Education
|
$_____________________ |
|
Medical/dental care
|
$ ______________________ |
|
Clothing and grooming
|
$________________________ |
|
Insurance (life and health)
|
$_____________________ |
|
Child care
|
$_____________________ |
|
Gifts and charity
|
$_____________________ |
|
Entertainment and recreation
|
$_____________________ |
|
Utilities
|
$_____________________ |
| Savings | $_____________________ |
| Other | $_____________________ |
| Total Monthly Non-housing Expenses | $_____________________ |
ESTIMATE MONTHLY HOUSING EXPENSES
| Proposed mortgage payment | $_____________________ |
| Allowance for property taxes | $_____________________ |
|
Allowance for utilities (heat, water, phone, electricity) |
$_____________________ |
| Allowance for maintenance, furnishings | $_____________________ |
| Allowance for insurance | $_____________________ |
| Home Owner Assoc./ Co-Op dues /fees | $_____________________ |
| Total monthly housing expenses | $_____________________ |
STEP 3: COMPARE
Compare estimated monthly housing expenses (Step # 2) with income available (Step # 1).
Step #1: Total Net Income $________________
Step #2: Total Expenses $________________
Difference (if any) $________________
If income available from Step 1 does not equal or exceed total expenses from Step 2, then you must re-evaluate your budget and resources.
What Can You Afford for your Mortgage?
Make sure you, make the decision.
Not the, Financial Institute, Realtor or Builder!!
The following chart shows a standard debt to income ratio used by many Finance institutes. I personally wouldn’t budget this high for your payment. Thirty years ago, we would only figure One week gross pay for one income, Not two incomes. If we would of used this formula for the last 25 years the Builders and Financial Institutes would have to be more competitive and home owner would not be exposed ,like the last four or five years.
$ 50,000 income per year would be a monthly payment of no more than $ 962.00 per mo.
The following chart shows your maximum monthly payment and maximum allowable debt load based on your gross annual income (remember, gross income is pretax income):
Debt-to-income ratio examples
|
Gross income |
28% of monthly |
36% of monthly |
|
$20,000 |
$467 |
$600 |
|
$30,000 |
$700 |
$900 |
|
$40,000 |
$933 |
$1,200 |
|
$50,000 |
$1,167 |
$1,500 |
|
$60,000 |
$1,400 |
$1,800 |
|
$80,000 |
$1,867 |
$2,400 |
|
$100,000 |
$2,333 |
$3,000 |
|
$150,000 |
$3,500 |
$4,500 |
Here's a look at typical debt ratio requirements by loan type:
Conventional loans:
Housing costs: 26 percent to 28 percent of monthly gross income.
Housing plus debt costs: 33 percent to 36 percent of monthly gross income.
FHA loans:
Housing costs: 29 percent of monthly gross income.
Housing plus debt costs: 41 percent of monthly gross income.
Taxes and insurance In addition, lenders include the cost of taxes and insurance when calculating how much house you can afford:
Real estate taxes: Because property taxes are part of your monthly mortgage payment, it is important to get an estimate of what yours would be. Ask your real estate agent or tax office for the rates that apply in the area you want to buy.
Homeowners insurance: You must insure your property to obtain a mortgage. You can get an estimate of insurance costs from an insurance agent or insurance company. Be sure to inquire about special requirements for hazard insurance, such as mandatory coverage for floods, earthquakes or wind (in coastal areas). If you put down less than 20 percent of your home's value, you also will have to obtain mortgage insurance or take out a second loan, called a piggyback loan, to bring the first mortgage down to 80 percent of the purchase price. Both alternatives will raise your monthly payment.
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