I havent been in the market for a mortgage but basically would like to know some simple things: Lets say that a person’s credit score is around 700. The person makes less than 50K a year. Can they get a loan to buy a house that’s around 200K? How much down payment would they need to make. What would be their monthly payment roughly? Is there a rule of thumb that says, if you make this much, you can probably a get a house worth this much, if you pay down $x, and have decent credit. Thanks.
It aslo depends on the aprpoval debt-to-income ratio of the underwriting bank. You can get a pre-approved letter from almost all the bank free.
52% debt-to-income ratio is really the absolute max (there are some smart brokers who can get around the system). Debt = annual principal, interest, insurance, and HOA fees plus any other debt (credit card, car, etc.). Income = any base, non-bonus income with 2 years of work history preferable. An average of your bonus can be included with 2 years of bonus. For an FHA loan, the bare minimum you need to put toward the transaction is 3.5%. According to my firm’s rent-buy analysis, if you put down 3.5% cash, had a 5% 30-year fixed rate, and earned $50,000 per year in income, the absolute and utter max you can afford is about $316,000.
Thanks kkent. I am a bit surprised with the 3.5% cash requirement. Everyone kept saying that you have to put down at least 20% to get a mortgage.
Yeah, a lot of people don’t know what they’re talking about, particularly with real estate and mortgages. Granted, I gave you the bare minimum requirements and absolute max affordability, but yeah, FHA requires 3.5% skin-in-the-game. When you get into jumbo, standard loans, that’s when the down payment requirements can get heavy. My advice to your friend is to find a mortgage broker to get him/her access to all of the best products at the best prices. If looking to buy around $200k, FHA probably the way to go. BTW, a 700 credit score is more than OK. It’s downright good. There is still liquidity out there. There is no reason outside of work history that should prevent you from obtaining a quality loan product.