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How Much Mortgage Can I Afford? How to Calculate



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hi I'm Jevon Easton today I'm going to

talk to you about how much mortgage can

I afford people are constantly trying to

figure this out and they don't really

generally want to talk to a lender off

the bat they want to figure out

themselves so I'm going to give you a

quick and easy way to figure out kind of

the basics this isn't a real

qualification so don't think that this

is 100% bulletproof this is just a

guideline for you that's better than you

know guesstimating okay so the first

thing is there's two different ways to

look at this personally I'm very

financially conservative and if you

listen to what people like Dave Ramsey

or Suze Orman they're gonna urge you to

have a housing payment that's less than

30 percent of your gross income okay

your gross income is the amount you make

before taxes so that's before federal

states Social Security Medicare

healthcare so if for instance you make

ten thousand dollars a month 30 percent

of that would be three thousand dollars

so to be financially conservative you

want your mortgage to payment to be less

than three thousand dollars a month now

I'm gonna have a link to a mortgage

calculator somewhere in the comments on

this video so if you're trying to figure

out how to put together a payment feel

free to click on that link okay um

thirty percent of your gross income is

not always realistic so there are

certain areas in the country where the

cost of living is so high like it'd be

great if you could do it for thirty

percent but it's not super likely so as

a lender when I'm qualifying I can

actually go up to forty three percent of

your gross income so if you make ten

thousand dollars a month that's forty

three hundred dollars okay so all you're

gonna do is you're going to take your

gross income monthly times 0.3 to get

what the conservative amount would be

for your total monthly mortgage payment

now that includes principal and interest

taxes homeowners insurance mortgage

insurance if

need it and if it's a condo your HOA

dues okay and then if you want to go

will shoot that's never going to work

try it times 0.43 so your gross income

times 0.43 okay so that's where your

housing payment should fall into line

now there's something else that comes

into play here

and it's what we as a lender call your

back and ratio so what that is is it's

your gross income versus your monthly

mortgage payment and all your other down

on your credit report okay so if you

have diverged student loans there's

special rules about those we will hit

you with the payment nine out of ten

times so you really want to make sure

you're talking to originator or checking

out with my videos on the student loans

so that you know how that affects you

but let's keep this simple let's say

your finances are super easy so let's

say you made ten thousand dollars a

month and let's say the mortgage payment

for the house you want is going to be

thirty seven hundred dollars and you

have a car payment of seven hundred

dollars and three hundred dollars admin

monthly minimum credit card fees okay

and so basically you've got a thirty

seven hundred dollar mortgage payment

and a thousand dollars in monthly debt

on your credit report so what I'm gonna

do is I'm going to do thirty seven

hundred plus thousand dollars and and

then I'm going to divide that by the

monthly gross income so that's ten

thousand dollars so that tells me that

the gross the back end ratio is forty

seven percent

I just even used a calculator doing that

and cuz I'm talking and talking

anyways so 47% is the total fact and

ratio now personally 47 percents a

little bit high realistically you're

gonna want to keep your monthly debt for

your credit cards your car payments your

student loans and your housing payment

ideally under 43% okay if you're looking

at a jumbo loan that's pretty critical

there's some investors that will go up

to that 50 percent debt to income but

there's a lot that won't so if for

example you know you are looking at a

jumbo loan and you make $10,000 a month

and you want to have your pick of

investors all your debt including your

proposed monthly housing payment needs

to be under $4,300 a month

okay so this can be a lot to take in and

I know it's hard for a lot of people to

visualize this so beyond the mortgage

calculator link I'm actually gonna have

a link to an article that will explain

how to calculate this there's a lot of

stuff online that will give you stuff to

take into consideration that just

doesn't make a lot of sense and it's not

the way a lender looks at it and

thinking oh I can afford this monthly

payment that's not the way to do it

either you know I talk to people every

single day and if I could have spent

seven people who make $10,000 a month

and they're all done how different

opinions on what they can afford they

could have the same amount of credit

card debt one's gonna think they could

afford a $7,000 month payment once and I

think they can't afford $1,500 so if you

want the actual numbers I would urge you

to check out the links on

come on this and then read the article

about how to calculate if you have

questions or you want to get really

qualified feel free to myself and my

team of call but how much mortgage can

you afford this is going to be the most

realistic way to figure out thanks for

watching