Chris Salese

For those of you who are potential first-time home buyers, even if you’re just casually wondering what you can or cannot afford, it can be a challenging task.

This is especially true during times of high rate volatility in the mortgage market.

While of course there are plenty of online resources who are waiting to lure you into their easy and really fast qualification process to help quickly answer your questions that might not be the best place to start.

In order to get some direction from most online resources, you could be asked to first supply some personal information without knowing whether or not you’re supplying it to a trusted source.

By ‘trusted source,’ I don’t necessarily mean that the answers or information being returned to you are always coming from an online source that’s not credible because that’s not true.

What I mean is that as a first-time buyer, you should be looking to create your own estimated budget before you engage with a mortgage professional.

Prior to searching for a home, it’s a good idea to calculate how much money you might be qualified to borrow and your monthly mortgage payment for it.

In fact, it’s a great help to have a general idea of estimated numbers before reaching out to your local lender.

It’s really no different than making plans to go out for a multi-Michelin star dinner or to grab a slice of pizza, because either way you typically would plan in advance depending on which one works the best for you.

However, the problem is that many first-time home buyers don’t know how or where to begin when trying to determine a quick estimate of how much home they can afford.

Fortunately, it’s a fairly straight-forward exercise, and you can really impress your lender when you arrive at your first meeting with them by knowing a ballpark idea of your own borrowing parameters.

For example, assuming you’re paid a salary, you want to calculate how much gross income per month you earn before taxes.

You can probably do the same if you’re hourly as well, yet sometimes those calculations can be a little tricky. If you’re self-employed, you may have other factors to consider.

Next, you need to add up your total minimum monthly debt payments for any credit cards, car loans or leases, personal installment loans, payroll or 401(k) loan payments, student loans or any other loans such as child support, alimony, etc.

Once you have your total gross monthly income number, you need to multiply that by a factor of .43, although a .43 qualifying ratio can be higher with compensating factors like high credit scores and good cash reserves. For this exercise, stick with the conservative ratio.

Finally, you want to take your total minimum monthly debt number and subtract it from your newly calculated 43 percent qualifying ratio figure.

The result is your estimated maximum monthly housing payment allowance, including taxes and insurance, for which you may be qualified.

Chris Salese can be reached at chris@delsurmortgage.com or 707-363-4439. He is a licensed California mortgage lender (LO NMLS #254469 — State License #CA-DBO 254469 — Corp License #4170013 Corp NMLS #3113) and equal housing lender.

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