How Much Can You Afford? Montana

Qualification ratios are set by the lender that state your housing expense to income, and housing expense plus other debts to income, cannot exceed a specified number. Many lenders use a 28% housing expense to income and a 36% housing expense plus debts to income. Other ratios may be how much you put down on a home.  It is important to remember that these ratios may vary from lender to lender and each application is handled on an individual basis.

Housing Expenses

Your montly housing costs include the mortgage principle, interest, taxes and insurance often abreviated PITI.

• Generally speaking, to qualify for conventional loans, housing expenses should not exceed 26% to 28% of your gross monthly income.
• For FHA loans, the ratio is 29% of gross monthly income.

Example

Long-Term Debt

Any expenses that extend 11 months or more into the future, such as car loans, are termed long-term debt.

• For conventional loans, total monthly costs, including PITI and all other long-term debt, should equal no greater than 33% to 36% of your gross monthly income.
• For FHA the ratio is 41%.

Budgeting for Your Home

When budgeting to buy a home, it is important to allow enough money for additional expenses such as:

• maintenance
• utilities
• homeowner’s insurance
• property insurance