Monthly Payments?

[st4stinger4]

Good Morning Everyone,

OK, have a question.

I was pre-approved for a VA loan through BoA for 417K (no down pymnt), for myself and if I want a house that is 500K they will give me 478K (but then i have to put 25% of the difference between 417 and 500K). If my fiance and I do it together through FHA we are pre-approved for 750K.

Our gross yearly income is 185K (15K a month...net is about 8700) and our monthly bills combined are about 3000 (thats EVERYTHING).

My question is....I've read that you should not exceed 36% of your gross monthly income for mortgage and taxes...is that true?

And ,we dont want to be "house poor"...we want to be able to save and do other stuff (trips, more schooling...etc).

What would be a good monthly number for mortgage pymnt and taxes combined in our situation?

We found a house we REALLY love for 519K....we can get them to 500....taxes are 11,224 a year.....intrest rate quoted to me is 5.1% for the VA loan.

Thanks for any advice anyone can give.

And I have learned sooooo much through this site!!!! Wish I would of found it ealrier :-).

Thanks again

[st4stinger4]

Sorry, it's 25% of the difference between 478 adn 500.

[Anonymous]

Great question.   As a mortgage banker, we talk about those ratios.  Huge problem:  they're not related to how real people look at debts. 

There are two ratios, one for your housing ratio and then the total debt ratio.   I have this hunch that "your $3k" isn't how a banker would calculate it.  Cell phones & internet services, for example, are absolutely bills, but we don't add them into your total debt ratio.  

To your question about the 36%, in general, going too far over that amount is probably not a good idea.   Depending on the nature of the $3k in monthly bills, sometimes staying even lower than 36% can be a good idea. 

That BofA rate is fairly high.  How old is that quote?

[Anonymous]

36% for mortgage alone is not a normal %.  The normal is 31% for mortgage and 43% for total debt.  That is the FHA maximums and is generally considered to be the high end of what is reasonable.  If there are some extenuating circumstances then there are exceptions (for example if one of your incomes is not on the loan so you know your true DTI is alot lower than the paper DTI).  That said, economists and financial advisors usually recommend roughly no more than 25% income towards housing (PITI) and 35% towards all debt.  Again, in the real world those numbers are up a bit from that to the 31/43 numbers FHA goes by.

[Anonymous]

Mickie brings up a really good point, but I'm seeing less of that "loan by percentage" stuff and financial planners that are actually financial planning. Realistically, FHA hasn't used 41 DTI in a decade.  You can still easily get an approval for 49% these days, but it is a giant leap in the wrong direction.

For example, we have a similar income.  My first $2k goes to an ESOP that is at least a 10% discount.  I receive a partial match on 401k on first 6%...say roughly another $1k comes out.  So my "$15k" is really $12k after the most important expenses for the month. 

The percentages are good for approvals, but they're irrelevant if you pay yourself first.  If I take 31, 36, or 43% on the $12k, I'm still light years ahead, saving 20% of income, and nowhere near the maximum DTI's for a loan.

Just my $.02,

[st4stinger4]

Thanks for the input!

So with the roughly 5500 we have left after paying actual "real time" bills of 3K a month, we can only pay 1815 for mortgage and taxes??? is my math correct? Cause I got to tell ya...on Long Island...you get a one bedroom shack for that :-)....and the bedroom is optional! Plus the taxes are 1000 a month..leaving 815 for the actual mortgage payment! That cant be correct, can it?

[st4stinger4]

the 5.1 % was a month ago.......3 credit scores at time of pull were....660/661/693.

2+ years of clean on-time credit hx with some lates before that.

[st4stinger4]

ESOP? PITI?

[Anonymous]

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@st4stinger4 wrote:

Thanks for the input!

So with the roughly 5500 we have left after paying actual "real time" bills of 3K a month, we can only pay 1815 for mortgage and taxes??? is my math correct? Cause I got to tell ya...on Long Island...you get a one bedroom shack for that :-)....and the bedroom is optional! Plus the taxes are 1000 a month..leaving 815 for the actual mortgage payment! That cant be correct, can it?

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Since you mentioned L.I. have you looked into the SONYMA program.  Its a program for residents of NYS who want to buy a home in NYS.  The program itself is similar to fha but they also have they're own va program as part of it.  The down payment requirement is less than fha so since your looking at spending atleast 500,000 you would save alot of money there.  Also the max price with the program is a lot higher than fha.  The rates for all their programs are below 5 with many at 4.875 or lower

http://www.nyhomes.org/index.aspx?page=26

[Anonymous]

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@st4stinger4 wrote:

ESOP? PITI?

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PITI=housing expense.  Principal, interest, tax, and insurance. 

I was wrong on ESOP...is actually an ESPP, employee stock purchase plan.   It's just another savings vehicle.  When I do my own home loan, I work backwards from my gross, less retirement/savings/other fixed expenses.  I then base my housing payment on the leftover.  MOST underwriting systems are designed to look at retirement savings as the leftover.  I'm in Chicago, not quite Long Island for costs, but I try and make sure that I'm neither house poor nor robbing my retirement for home expenses. 

Steelfan brings up a good point with SONYMA....if rates go up, those programs are incredible.  The Homes for Vets program is a little high in terms of rate today, but I've seen situations in Illinios where the state programs were still low even after "market" rates went up....can be a huge savings.  For now, the market is beating most state programs.