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So you're thinking of applying for a mortgage. Maybe its for your first home, or maybe its for your dream home. Either way, you want to be prepared, right? If you don't have any other debts to factor into the equation, I would like to personally give you a pat on the back, because that isn't the case for most folks these days. I want to show you three different examples of "how much house" you can afford, under varying circumstances. For all of the scenarios, I'll assume:

Income = $100,000 gross

Property Tax: $300/mo

Heating Costs: $100/mo (this is pretty standard as far as the mortgage application goes)

1. No Other Debts

Maximum Home Price: $475,000

Downpayment: $25,000

Mortgage Amount: $468,000 (Includes mortgage default insurance premiums)

2. Just a car payment

Now, add in a car payment of $600 a month. Some are less than this, some are a lot more!

Maximum Home Price: $445,000

Downpayment: 25,000

Mortgage Amount: $436,800 (Including mortgage default insurance)

3. Car payment + 10,000 Credit Card debt + 10,000 Line of Credit

Let's add on to the last example, and assume that you now have an extra $20,000 of revolving debt, in the form of a credit card and line of credit balance. 

Maximum Home Price: $350,000

Downpayment: $25,000

Mortgage amount: $338,000 (including mortgage default insurance premium)

The most notable difference, is when you throw in the revolving debt, on top of your car payment. $125,000 is a lot of house! That could be the difference between a starter home, and your forever home. Although it isn't the norm to come into a mortgage application with absolutely NO debt, I hope that these examples encourage you to keep your consumer debt at a minimum, especially if you're thinking of buying a home, renewing, or refinancing your mortgage in the near future. Keep in mind, that these are very basic examples; a live mortgage application usually isn't so black and white. I am often able to make suggestions to you to boost your chances of approval, and get you to where you want to be. The best part is, that my advice and experience is at your disposal, free of charge! So if you've been on the fence about getting an application going, give me a call, or send me an e-mail.

Kristen Bellows, Mortgage Broker

TMG - The Mortgage Group