Can You Afford This $275,000 Indiana Home?
August 24, 2023
How Is My Income Calculated To Qualify For A Mortgage?
With interest rates getting higher and higher, many Kosciusko County, Indiana home buyers are wondering how much home they can afford to buy. This is one of the top questions we get, especially from first-time home buyers in Warsaw and Winona Lake. And while many lenders tell borrowers to submit a loan application in order to know, you can do some very simply math on your own in order to know if you’ve got a shot at qualifying to buy the home.
Pro tip: you don’t want to have your credit pulled until you’re ready to get pre-approved, especially if your credit is on the qualifying bubble. If a lender pulls it it might knock a few points off your score, which could impact your qualifying rate and whether or not you can get approved at all. Let’s take a look at some examples of how your income is calculated when applying for a mortgage.
This house is currently for sale on Zillow for $275,000. Here’s how the lender is going to calculate your income when qualifying you for pre-approval.
705 S Main St, Ligonier, IN 46767
Underwriting Rule
Your new mortgage payment + all your other bills cannot be higher than 50% of your gross monthly income.
In order to know what your gross monthly income is, follow these simple steps:
$70,000 Gross yearly income / 12
= $5,833
$5,833 / 2
= $2,916
Your total monthly mortgage payment and all your other bills (car payment, credit cards, student loans, etc.) cannot be higher than $2,916.
According to Zillow, the estimate principle & interest payment for this house = $1,717.
Total Mortgage Payment Estimate:
$1,717 principle & interest
$125 property taxes
$150 homeowners insurance
= $1,992 total monthly mortgage payment
If you don’t have any credit card, student loan, personal loan, or car payments, you should qualify based on your income. But what if you do have some other payments? Here’s how those monthly payments are factored in to the calculation:
Scenario 1
$500 car payment
$150 credit card payment
$150 student loan
= $800
$800 + $1,992 total monthly mortgage payment
= 2,792 total monthly payment including the mortgage payment
Because this is less than the $2,916 max total monthly payment, you would qualify for the mortgage based on your income.
Scenario 2
$500 car payment
$500 credit card payment
= $1,000
$1,000 + $1,992 total monthly mortgage payment
= $2,992 total monthly payment including the mortgage payment
Because this is greater than the $2,916 max total monthly payment, you would not qualify for the mortgage based on your income.
Solution
Pay off the debt
By paying off the debt you would eliminate a $500/mo payment and thereby qualify for the mortgage.
Get a lower rate
Another option would be to shop around or buy points to get a lower rate to bring down your mortgage payment in order to qualify.
Put more money down
Some Indiana home buyers put more money down to lower the loan amount and therefore the monthly payment.
Get seller credits
Get credits from the seller that will cover closing costs allowing you to buy points to lower the rate and payment, or put more money down to lower the loan and monthly payment amount.
Find a less expensive home
Stay within your ideal and realistic home buying budget. Rates have gone up recently so you might find yourself having champagne tastes and beer wallets.
Not A Solution: Sitting on the Sidelines
Waiting for rates to come down
Although mortgage rates have gone up recently, they are still much lower than historical averages. You waste more money renting than you do with a higher mortgage rate:
Renting
$1,500/mo
= $18,000/year
Owning
7.5% interest rate
= $2,377/mo (principle & interest)
5% interest rate
= $1,825/mo (principle & interest)
$552/mo difference between the two mortgage payments. So, while you’re waiting to save $552/mo with a lower interest rate, you’re still wasting $11,376/year renting a home.
About Bee Mortgage Indiana
Bees are so important the the earth’s ecosystem we’d all die without them. We beelieve affordable mortgages are just as important the the American family.
Backed by a community of local supporters and investors, Bee Mortgage is a locally owned and operated mortgage company licensed in Indiana and Florida. As a proud member of the Kosciusko County Chamber of Commerce, Bee has been featured extensively in the national news media. Upon opening in the state, Kosciusko County and all of Indiana home buyers can use Bee Mortgage to get a low mortgage rate. With a user-friendly loan application process and generally happy and helpful people who are born and raised in the Warsaw area, Bee makes getting pre-approved fast and easy.
By working with multiple lenders, you can rest assured you’re getting the best mortgage rate possible. Bee offers fixed and adjustable rates mortgage crafted around your unique budget and financial goals. From 10, 15, 20 or 30-year mortgages, each loan has a certain payment and interest rate to consider.
Bee is well known for three things:
- Instant pre-approvals
- Low rates
- Fast closings
Instant pre-approvals
Bee Mortgage offers many convenient ways to get pre-approved and apply for a mortgage:
- On our website
- In-person at our office
- Over the phone
After you apply one of our dedicated loan experts will guide you the rest of the way to pre-approval. While not everyone is ultimately pre-approved, most applications are processed within one hour of applying, including weekends. Kosciusko County home buyers now have access to fast pre-approvals. Getting pre-approved quickly can give you the edge when making an offer on a home.
Low rates
This is where the rubber meets the road, as they say. In today’s home buying market in Warsaw, Kosciusko County home buyers need the lowest rate possible. This is where Bee excels! To date, we have offered the lowest rates our home buyers could find. And they shopped us with other lenders. Don’t take our word for it. Check out our customer testimonies; and, hopefully, you’ll be the next one! In many cases, we beat other lenders by up to a full 1.5%!
Fast closings
A lender that closes fast and early means 1) They know what they’re doing, and 2) Do if well and fast. Bee offers personalized service and doesn’t pass you off to another person once you’ve locked in your rates and chosen to go with Bee. From start to finish you work with a dedicated loan expert. This licensed loan officer will guide you through to closing, which, most of the time happens early. In fact, Bee closes over 1/2 of its loan early. With a team of loan experts working diligently behind the scenes, turn around times are accelerated, tasks completed fast, and clear-to-close obtained in as little as a few days.
Kosciusko County Home Mortgage
For Warsaw homeowners wanting to refinance into a lower rate, Bee has you covered. While each scenario is different based on how much you owe on your current loan, and how long you have to pay it off, our low mortgage rates can possibly save you thousands of dollars of interest payments and years of payments. A Kosciusko County refinance and Warsaw refinance are just a click away. To see if you can refinance into a lower interest rate and pay your home off faster, contact us today.
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To see if you qualify for a streamline refinance, contact Bee at 855-626-1999 or apply here today!
If you’re ready to make the leap into homeownership, contact us today! Our dedicated loan experts will walk you through every step of the way ensuring you get a low rate and close quickly!
If you’re looking for a streamline refinance to lower the rate and payment, apply here today or call 855-626-1999 and speak with one of our expert loan officers in your area!
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Bee is a leading Florida mortgage broker with over 10 Florida local offices that’s been featured heavily in the local and national news for its instant pre-approvals, low rates, fast closings, and new mobile technology. For more news and resources, click here.
