ExclusiveHow Much House Can I Afford Military

How Much House Can I Afford Military

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Negotiate With The Seller

How Much House Can I Afford?

There is no reason you cant ask for seller contributions instead of negotiating for a lower purchase price. Depending on the type of mortgage you choose, the seller can contribute 3 to 6 percent of the home price in closing costs.

This can make all the difference when you want to buy a new home and stop renting.Seller contributions can cover closing costs, buy your interest rate down to a more affordable level, or make a onetime payment to cover your mortgage insurance.

Home Affordability By Debttoincome Ratio

Your debttoincome ratio measures your total monthly debts including your mortgage payment against your monthly income. The higher your existing monthly debts, the less youll be able to spend on your mortgage to maintain a healthy DTI.

For example, say you make $50,000 a year and want to stay at a 36% DTI.

In that case, your total debts, including mortgage and any other debt payments cant exceed $1,500. Heres how that affects your home buying budget:

Annual Income
$1,000$180,406

The examples above assume a 3.75% fixed interest rate and 3% down on a 30-year mortgage. Your own rate and monthly payment will vary.

How To Calculate How Much House You Can Afford

Okay, all you really have to do is crunch a few numbers to figure out how much house you can afford. And if math isnt your thing, hang in there. Well walk you through it step by step. Weve never lost a patient.

And for you married folks, make sure you go over the results with your spouse. You both need to be on the same page when it comes to your budget and what you can actually pay. After all, shopping for your home sweet home will feeldare we sayromantic once you and your sweetheart set shared expectations.

Simply follow the steps below.

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Military Pay Chart: How Much House Can I Afford

Your dedicated service safeguards our freedom, and our grateful nation hopes that you achieve your dreams. Do you dream of owning a home of your own? Keep reading for information about using your military compensation to make your dream of homeownership a reality.

Lets start with a quick refresher on your military pay chart.

What Monthly Expenses Do You Have

How Much House Can I Afford Military

! Please enter an amount less than }.

Estimate your monthly expenses such as groceries, transportation, child care, insurance, shopping, media and regular contributions to savings.

Please do not include rent or housing expenses.

If you’re buying a home with a spouse, partner, friend or family member, include their monthly expenses as well.

If this amount is higher than your monthly income before taxes, please contact us to discuss your options.

Step 6 of 6

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What Is The 28/36 Rule

Lenders may determine your ability to afford a new home by using the 28/36 rule. Breaking it down, the rule establishes that:

Housing expenses should be no more than 28% of your total pre-tax income. This includes your monthly principal and mortgage interest rate, annual property taxes, and private mortgage insurance payments .

Total debt should not exceed 36% of your total pre-tax income. This includes the housing expenses mentioned above credit cards, car loans, personal loans, and student loans so long as these monthly debt payments are expected to continue for 10 months or more.

In concrete numbers, the 28/36 rule means that a borrower who makes $5,000 a month should not spend more than $1,400 on housing costs every month. If youre a renter, thats the most you should spend on your lease to maintain good financial health.

However, for a homeowner, $1,400 should cover your monthly mortgage payment, as well as homeowners insurance premiums and property taxes.

How Our Mortgage Affordability Calculator Works

This calculator uses your ZIP code to estimate a property tax rate, and your credit score to estimate a mortgage interest rate. It uses your monthly income and your current monthly debt payments to calculate the monthly payments you can afford to stay under a target debt-to-income ratio. Finally, the calculator subtracts your other estimated monthly expenses, such as property taxes and homeowners insurance, to determine your monthly housing budget — and the total home price you can afford.

The formula used is: Monthly payment = – debts – tax – insurance.

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Ready To Start Your Home Buying Journey

Whether you’re just thinking about buying or you’re ready to buy, you can get started online!

The Mortgage Affordability Calculator estimates a range of home prices you may be able to afford based on the accuracy and completeness of the data and information you enter. The results are intended for illustrative and general purposes only, and do not constitute, nor should they be relied upon as financial or other advice. To discuss your full range of home-buying options, please contact your branch or call

The results are calculated and generated based on the accuracy and completeness of the data and information you have entered and provide an estimate only. The results are intended for illustrative and general information purposes only, and do not constitute, nor should they be relied upon as, financial or other advice. The interest rate shown is calculated either semi-annually not in advance for fixed interest rate mortgages or monthly not in advance for variable interest rate mortgages. These rates are only available for already built, owner-occupied properties with amortization periods of 25 years or less. Any application is subject to credit approval. For more information, please contact us to discuss your home-financing options.

Youre Our First Priorityevery Time

How Much House Can I Afford with VA Loan?

We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.

How much house can I afford?

$583,522

This DTI is in the affordable range. Youll have a comfortable cushion to cover things like food, entertainment and vacations.

*DTI is the main way lenders decide how much you can spend on a mortgage.

This DTI is in the affordable range. Youll have a comfortable cushion to cover things like food, entertainment and vacations.

*DTI is the main way lenders decide how much you can spend on a mortgage.

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What Is A Va Loan

A VA loan is guaranteed by the U.S. Department of Veterans Affairs. The loan itself isnt actually made by the government, but the fact that its backed by a government agency makes lenders feel more comfortable offering these loans because they take on less risk than with a conventional mortgage.

As a result, its possible to get a VA loan without a down payment, and sometimes with looser credit standards. While you still need to meet certain requirements, and the lender still needs to approve you, if you qualify for a VA loan, it can help you attain homeownership with less money than youd need in the bank otherwise.

What Are Va Entitlements And Why Are They So Important

A key feature of VA loans is the entitlement. A VA loan entitlement is basically the amount of the loan that the VA will guarantee to the lender if you default.

There are two types of entitlement:

  • Basic entitlement: up to $36,000 for loans worth less than $144,000, or 25 percent for loans of that amount or more.
  • Bonus entitlement: Up 25 percent of the Federal Housing Finance Agency loan limit, minus the basic entitlement.

For those who need to purchase a home that costs more than $144,000, the bonus entitlement can be used. For example, in most counties in the U.S., the FHFA conforming loan limit in 2021 is $548,250 and $647,200 in 2022. In that case, 25 percent of the loan amount would be $137,062.50 in 2021 or $161,800 in 2022. However, for the total entitlement, you need to subtract out the basic entitlement, leaving you with $101,062.50 in bonus entitlement money for 2021 and $125,800 in 2022.

Many lenders are willing to loan those who qualify for a VA loan up to four times the amount of their entitlement, so you might be able to get a loan for $144,000 on the basic entitlement of $36,000.

For those who live in high-cost areas, the bonus entitlement is figured in the same way, but based on the higher FHFA conforming loan limit, which is based on the county where the house is located. Before applying, check the FHFA website for more information on the loan limits in your area.

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Who Qualifies For A Va Loan

Although lenders set their own requirements for certain aspects of qualification, VA loans have more lenient credit requirements than many other mortgage programs.

Not all who have served in the Armed Forces qualify for a VA loan. You must meet at least one of the following criteria to qualify:

  • Youve served 181 days of active service during peacetime.
  • Youve served 90 consecutive days of active service during wartime.
  • Youve served more than 6 years of service with the National Guard or Reserves or 90 days under Title 32 with at least 30 of those days being consecutive.

Youre the spouse of a service member who lost their life in the line of duty or as the result of a service-connected disability. You generally cannot have remarried, although there are exceptions.

Secure A Certificate Of Eligibility

How Much House Can I Afford Military

Youll need this to be eligible for your VA loan. Youll need to provide proof of your military service based on your status.

VA-approved lenders, like Rocket Mortgage, can help you get your VA certificate of eligibility quickly with proof of service.

Tell your lender you need your certificate of eligibility early in the process so they can help you get it.

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A Simple Formulathe 28/36 Rule

Here’s a simple industry rule of thumb:

  • Housing expenses should not exceed 28 percent of your pre-tax household income. That includes your monthly principal and interest payments plus all the such as property taxes and insurance.
  • Total debt payments should not exceed 36 percent of your pre-tax incomecredit cards, car loans, home debt, etc.

What Is Mortgage Affordability

Mortgage affordability refers to how much youâre able to borrow, based on your current income, debt, and living expenses. Itâs essentially your purchasing power when buying a home. The higher your mortgage affordability, the more expensive a home you can afford to purchase.

The term âaffordabilityâ is also used to describe overall housing affordability, which has more to do with the cost of living in a particular city. If the cost of housing relative to the average income in a city is high, it will be seen as a less affordable place to live. The two terms are related, but itâs important to understand the difference.

There are many factors that will affect the maximum mortgage you can afford to borrowincluding the household income of the applicants purchasing the home, the personal monthly expenses of those applicants , and the expenses associated with owning a home .

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Va Loan Funding Fee And Closing Costs

Borrowers should also consider the impact loan size has on VA funding fees and general loan closing costs. To offset the costs of the loan program, the VA imposes a funding fee ranging from 1.4% to 3.6% of the loan amount. Yes, you can roll this fee into your total loan amount and pay it off over time. But, you should still recognize that, the larger the loan, the larger the VA loan funding fee.

Additionally, borrowers need to pay other loan closing costs, most of which cannot be rolled into the loan balance. While these costs will vary with lender and location, a common rule of thumb calls for 3% of the loan amount in closing costs. And, borrowers need to pay most of these in cash at closing. That is, no down payment doesnt mean no cash at closing. Borrowers need to plan for potentially paying thousands of dollars out-of-pocket in loan closing costs. Generally speaking, the smaller the mortgage, the smaller the out-of-pocket costs.

Things That Could Change Your Home Affordability Calculator Results

How much home can you afford?
  • Your credit score

    Your measures your current and past history of managing credit. A credit score above 740 usually helps you snag the lowest rate and monthly payment, which means you can potentially afford a more expensive home.

  • Your monthly income

    Lenders look for a stable monthly income, which means a salary or hourly wage will give you a home affordability number you can count on. If youre self-employed or receive variable commission income, youll need to average out your income based on your tax returns for the past two years.

  • Your total monthly debt

    Lenders take a look at how much debt you have now, and how much youll have with your new mortgage payment. They take both of these sums and divide them by your gross monthly income to determine two types of DTI ratios:

  • Your front-end DTI ratio. This figure divides your new house payment by your income, and most lenders prefer that it doesnt exceed 28%.
  • Your back-end DTI ratio. Lenders add all your debt to your new house payment and then divide it by your income, and most prefer a DTI ratio of about 43%.
  • Your loan term

    Youll be able to afford a bigger home with a longer repayment term, such as 30 years. However, a shorter term can save you thousands in interest charges, if the higher payment doesnt strain your monthly budget.

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    Unite Your Mortgage And Budget

    You do not need to buy a house for the maximum amount of money you can borrow. An examination of your lifestyle and budget requirements will help you draw up a successful home purchase plan. Remember to think about your future money necessities when youre coming up with an estimate of how much you can afford to spend on your home.

    Lastly, congratulations on deciding to buy a home. Purchasing a home is one of the best long-term investments available. Your military career opens up financing opportunities, such as the BAH and VA loans, that make buying your home an affordable investment. to learn how Homes for Heroes can help you with your real estate objectives.

    Connect with a local specialist today to maximize your savings.

    Qualifying heroes: Firefighters, Law Enforcement, Military , Healthcare Professionals, EMS, Teachers

    How Much House Can I Afford

    As you may have noticed, the airwaves are filled with bleak, sad stories of foreclosures and bankruptcies. It may seem hard to believe, but the national home price is off nearly 25 percent from its peak and that’s just the average. Certain states in the U.S. have seen even more dramatic declines, according to the widely quoted Case-Shiller index of home prices. The headline is this: Millions of Americans are literally being held hostage by their homes. And, inquiring minds want to know

    How Much House Can I Afford?

    The rule of thumb is that a military family can comfortably afford a home that is up to three times their average annual household income. Where did this number come from? Well, think of your annual income as a pie. It has four slices: taxes, savings, needs, and wants. For most people, taxes chew up about 25 percent of their gross income. In an ideal world you should save 15 percent of your gross income. So that leaves you with 60 percent of your gross income for everything else. Your housing costs, your transportation costs, your health care, your child care, your food, your entertainment, etc.

    As you think about home ownership, here are three rules of thumb that can help:

    • Only buy a house when you can afford to make a 20 percent down payment.
    • Only use a 15-year, or 30-year fixed rate mortgage.
    • Only buy a house if you think youll live there for at least five years .

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    An Example Of What You’ll Pay With A Va Loan

    Let’s say that the mortgage calculator determined that you can spend as much as $275,000 on a home. Since you’re taking out a VA loan, you won’t need to put anything down or pay for mortgage insurance.

    However, you will need to pay a one-time VA funding fee at closing. This fee can be rolled into the loan amount and paid monthly, but we’ll include it as an upfront cost in this example. If you put 0% down, the fee is 2.3% for first-time VA loans and 3.6% for subsequent loans. The fee decreases if you put more money down, but let’s assume that it’s your first VA loan and you’re not making a down payment in this scenario. In that case, your funding fee would equal $6,325.

    With a 4% closing cost, you’ll need to pay another $11,000 upfront. That comes out to a total of $17,325.

    Upfront costs

    You can learn more about VA loans here.

    Work With A Buyers Agent We Trust

    How Much Home Can I Afford?

    For more guidance on buying a house you can afford, work with a real estate agent. A good agent will help you set the right expectations when shopping for a home in your price rangethey may even be able to find you a home sale others dont know about.

    For a quick and easy way to find an agent we trust, try our Endorsed Local Providers program. We only recommend agents who actually care about the financial path youre on and wont push you to overspend on a house just so they can bring home a bigger commission check.

    About the author

    Ramsey Solutions

    Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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