There is also a bit of “gray area” when it comes to affordability. The definition of that gray area also changes from one program to another; what flies for FHA might not work for USDA.
Rebirth of Responsibility
I have always told my clients the following:
I am going to tell you what the bank says you can afford. You tell me what you’re comfortable with.
This is the payment I want!
That might not sound like a profound statement, and maybe it’s not. But I can tell you that it has not always been the standard operating procedure in borrowing and lending.
The bank said I could…
If I had a dime for every time I heard a borrower say those words, I could afford to buy a latte. And I’m not talking about the automated coffee machine at the local “Stop & Rob”; I’m talking the “boutique coffee shop 20 ounce with 2 extra shots of espresso” latte.
FHA home loan guidelines say you should have a debt-to-income ratio (DTI) of 31/43 per cent. It’s 41% for VA, 29/41 for USDA, and 28/36 for Conventional.
Those are the guidelines.
Now let’s talk gray area. Automated Underwriting approves higher DTIs all the time.
That doesn’t mean you should.
Listen to your Heart
Sounds affordable
Okay, I apologize for the Roxette reference ;-)
Just keep in mind that the first person you should listen to when it comes to how much house you can afford is you.
I am pleased to say that many of the clients I have been meeting lately already have this mindset.
If they haven’t really thought about it, I do have advice to share though.
If you are considering buying a home, and are currently renting, then you already have a baseline on what you can afford for housing. What is your current rent payment? How much deviation from that payment would you be comfortable with?
Also, and I am not a tax expert, but how will the tax advantages to home-ownership affect your comfort with a house payment?
Decide on a number you can reasonably afford before you do anything. Give that number to a Licensed Mortgage Professional, and they will be able to estimate how much house that gets you. That way, you begin with a plan. It’s better than the alternative.
If you need help determining how much house you can afford in Oregon or Washington, I am happy to help. Feel free to call 503.799.4112, email jason@mypmb.us, or fill out the following no-spam-guaranteed form:
