Drew Whipple on How Much You Can Afford

Mortgage expert Drew Whipple talks about how much home you can afford.

I’m here today with my good buddy, Mr. Licorice, and our special guest Drew Whipple, the mortgage whip. Today we want to talk about how much house you can afford. Drew is a mortgage expert, so he’s going to help us dive into this. 

What do buyers need to know? 

There are really three different components that factor into how much you can afford: the debt-to-income ratio, the interest rate, and the actual purchase price of the home. 

What exactly is the debt-to-income ratio?

The debt-to-income ratio is a basic equation that takes all your monthly debts (credit cards, student loans, etc.) plus the principal, interest, insurance, and any HOA fees. That total is divided by your monthly income, which comes out to a ratio. Basically, it calculates how much of your income will be used for debt. Certain programs allow for a higher ratio, and others are more restrictive. With an FHA loan, you can go up to 56%, but with a conventional loan, you want to be below 50%. 

If that $30 will get you into your dream home, do it!

What will their rate be based on? 

Many factors. The most important one is the buyer’s credit score. The higher the score, the lower the rate. Right now, we’re in an environment where the rates are climbing, so when you’re getting pre-qualified, you want to make sure you are still qualified as rates rise. If you’re looking at a $300,000 house and rates go up 0.5%, that would add up to $90 to the monthly payment, so you might not qualify anymore.

In today’s market, the purchase price can get crazy with all of the bidding wars. What does that mean for the loan?

We try to educate our buyers that an extra $10,000 comes out to only $30 more per month. At worst, that means you buy coffee at Dunkin Doughnuts instead of Starbucks. If that $30 will get you into your dream home, do it!

If you have any questions about how much home you can afford, call Drew at 856-924-1682. If you have any other questions about real estate, don’t hesitate to call or email me. We’d both love to help.