YOU CAN BUY MORE!!!!
Did you know 20 years ago most lenders would not allow your total house payment to be more than 28 – 30% of your GROSS monthly income? Additionally you could only have 36% in total debt. This means that if you made $5,000 per month ($60,000 per year) your house payment could be $1500 and your total debt could be $1750.00 See table below for an example.
| Yearly Income | Monthly Income | Maximum House | Maximum |
| $60,000 | $5,000 | $1,500 | $1,800 |
| $90,000 | $7,500 | $2,250 | $2,700 |
| $120,000 | $10,000 | $3,000 | $3,600 |
| $150,000 | $12,500 | $3,750 | $4,500 |
Today, lenders have become more flexible depending on your credit score. If you have a great credit score (>700) you will likely be able to have a much higher debt load than if you had a lower credit score. Some articles state that with great credit, you could potentially have a total debt load of 50% and a House payment of 40%. See below:
| Yearly Income | Monthly Income | Maximum House | Maximum |
| $60,000 | $5,000 | $2,000 | $2,500 |
| $90,000 | $7,500 | $3,000 | $3,750 |
| $120,000 | $10,000 | $4,000 | $5,000 |
| $150,000 | $12,500 | $5,000 | $6,250 |
Additionally, interest rates have a huge impact on your affordability. Just one percentage point in interest rates can result in up to a 9% increase in purchasing power for the same mortgage payment. That is, if interest rates dropped from 6% to 5%, and you were previously only able to afford a $500,000 house, now you would be able to afford a $545,000 house with the same mortgage payment.
So, as you improve your credit score and interest rates decrease, you may be surprised how much home you can afford to buy today. Check with a mortgage lender to find out how much you can afford, or give your New Jersey REALTOR a call and he can refer you to one.
Happy House Hunting!
New Jersey Mortage Calculator
This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate. This calculator factors in PMI (Private Mortgage Insurance) for loans where less than 20% is put as a down payment. Also taken into consideration are the town property taxes, and their effect on the total monthly mortgage payment.
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