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much do you qualify for based on typical lender requirements? Generally,
the lender will require that your monthly payments not exceed 28% of
your gross monthly income. Lets take a look at how a lender would
typically determine your ability to meet monthly house payments.
First,
determine your gross monthly income from all sources. Then multiply that
amount by 28% to determine an approximate allowable monthly payment.
This payment includes principal, interest, taxes and insurance. From
this amount subtract taxes and insurance to arrive at your allowable
principal and interest payment. You can obtain your property taxes from
the local township office and you can contact your insurance agent for
homeowner rates.
Now,
while shopping for your mortgage, you probably have discovered the
current interest rate. Use the chart below; find the column, which
applies to that rate. Follow the number down until you find the number
that is closest to your principal and interest payment. To the left of
that you will find the loan amount for which you probably qualify. If
you intend to apply for a 90% loan, divide the loan amount by .90 to
calculate the price of the house that would require this monthly
payment. The example below illustrates this procedure:
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