Type “How much house can I afford” into Google and you will get 51,900,000 results, most of which link you directly to a mortgage calculator. While Google is an awesome tool and mortgage calculators are great, there is just no substitute for actually speaking to a real life person. A person can answer your questions and give you perspective which is what we excel at here at Wallkill Valley Federal Savings & Loan. Below you will find information about mortgage calculations, a link to the WVFS&L mortgage calculator and some things to keep in mind when it is time to purchase your home. When you are ready, we trust you will give us a call.
The Calculation
The main components of the calculation are your income, monthly liabilities (your other debt such as car loans, credit card debt or student loans), monthly housing expenses (how much your estimated taxes will be, your estimated homeowners insurance plus, if required, private mortgage insurance) along with the interest rate and type of loan. You plug those numbers in and voila, you get your monthly mortgage payment estimate and the maximum mortgage amount. You can find our mortgage calculator here: https://www.wallkill.com/calculators/maximum-mortgage.aspx
Debt to Income Ratio
Much of the calculation hinges on your debt to income ratio (also known as DTI). Your debt to income ratio is the percentage of your monthly income that goes towards paying your monthly debt payments. The industry standard is 43% or less for all debts combined.
The Down Payment
Remember that the mortgage is the amount of money you will be borrowing from the bank and does not include the amount you intend to pay upfront. Most financial institutions are looking for homeowners to make a down payment between 3 – 20% of the purchase price of the home. If your down payment is less than 20%, you will need to pay PMI or Private Mortgage Insurance.
Important things to remember
Now that you have information, there are a few things we’d love for you to keep in mind as you plan for homeownership.
• Keep in mind long term financial goals as well. Can you still afford to save for your retirement and /or your children’s college fund? Do you want to put all the money you earn into your mortgage payment each month?
• Is the home you are purchasing your forever home? If it is and you are over 45, consider a 15 year mortgage verses a 30 year mortgage so that you can pay off your home before retirement.
Wallkill Valley Federal Savings & Loan (NMLS #404992) is dedicated to providing information to our customers so that they can take steps toward achieving their financial goals.
Are you in the market for a home? Cyndi O’Brien (NMLS# 754577) and Rick Farrow (NMLS# 800674) are available to answer questions and help you get started. To reach Cyndi O’Brien, call 845-946-6635 or 845-895-2051 ext 431. For Rick Farrow, call 845-527-2090 or 845-895-2051 ext 426.
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