how much house can I afford- but REALLY?

[kleahc]

Please help me figure out the actual qualifying range for mortgage. I have tried the "How much houde can I afford" calculators online, and I get a vastly diffeent amount with each one. The houses in my area that suit our needs are in the $180,000-$200,000 category (we live in one of the highest housing cost areas relative to income in the nation- we even made the Yahoo list of highest income-to-cost-of-living areas. Not good.

When I use the online calculators, I get results ranging from $220,000 to $154,000 for the total price of house I could afford. This is a HUGE range! I would liek to get a better idea of what I can look at, if anyone can help me. It will help me determine the right time to apply for pre-approval (do I need more savings, etc.)

Annual salary: $47,000

Mid-score: 633

Rate quoted: 6.6%

Total Cash-on-hand (for down payment and closing costs): $39,000

Monthly debts: I have three cards, each witha tiny balance (because of my lower credit score, my lender asked that I keep all three cards revolving to show current payment history, so I buy gas once each month with each card, and pay all but $1 at the end of the month. The total "Minimum Payment" which is what the lender used to calculate monthly debt totals $75. I have no other monthly debts.

Reason for 633: 1 medical collection from 2008 (unpaid) 2 medical collections from 2011 (paid) and 1 medical collection from 2010 (paid)

[ShanetheMortgageMan]

The online calculators are a bit sketchy since they don't correctly calculate property taxes or homeowners insurance, and usually assume everyone is using conventional financing, which isn't always the case.  I don't know any lenders offering a 6.6% rate, so you can disregard that, highest rate I've seen lenders offering now are in the low/mid 5's (unless sub-prime which is usually 7-8%).  The online calculators may or may not even consider taxes & insurance as part of the equation.  Most online calculators also take a conservative approach, usually limiting the total housing payment to no more than 31% of your gross income, whereas in reality it can get approved into the low 40's.

The amount of property taxes & homeowners insurance plays a big part in how much you can get pre-approved for, because those components make up the housing payment that lenders use to qualify you.  In areas of the country where property taxes are very expensive, such as Texas or New York, someone will be able to qualify for a lower sales price than in areas of lower property taxes, such as California or Colorado.

If you are buying in area with lower property taxes, then with 10% down you could probably figure your max sales price would be around $250k.  But if it's in an area of higher property taxes then it may be only a $200k sales price.

You mentioned you are already talking to a lender, has your loan officer estimated how much you should be able to qualify for?

[BrianB_The_Loan_Professor]

Because of your scores FHA is your best option (unless you plan on putting 20% down)

You have blems that will be overlooked (medical)

a Huge savings acct

and a deent income

You should not have any trouble with a 220k purchase based on what you have shared

You just need to have someone run the numbers and see what the automated system says

Good Luck
Brian

[kleahc]

Hi! Thank you both for your replies. The loan officer was doing numbers based on a house I had identified (before I decided to take another couple of months to increase savings) and that houe was $160,000, and she said that I was "fine". But it turns out that house was a foreclosure, and not really indicative of the prices in our area.

The 6.6% rate was quoted when I was using FreeCreditReport.com to pull my scores, and the mid was showing as 593. Here at MyFico.com, my mid is showing as 633.

I have been adding an average for my area for taxes into the online calculator, and insurance at $900, which is the number the loan officer used when she tried to do a best-guess.