How Much House Can You Afford?
If you are a prospective homeowner applying for a home loan with the USDA, one of the questions to find an answer to is how much house can you afford? Choosing the amount of mortgage to pay without becoming “house poor” will give you a balance between owning the house you want and staying within your budget.
If you are a low to moderate income family or individual and would like to own a home, the USDA offers some attractive programs and the means to keep your mortgage well within your budget and control.
“A man would do nothing, if he waited until he could do it so well that no one would find fault with what he has done.” — Cardinal Newman
Calculating Affordability for USDA Loans
What is a USDA loan? The US Department of Agriculture offers mortgage loans to suburban and rural homebuyers. The department doesn’t fund the mortgage loan, but partners with certain lenders in all the states who will loan homebuyers the money. The USDA offers a repayment guarantee, in case the loan defaults, because of which the lenders are more confident and give borrowers more attractive rates.
There are several advantages of using a USDA mortgage. There is no down payment needed. If you qualify for a USDA Rural Development home loan, you have the option to pay nothing out of pocket as a down payment. You can also use grants and gifts towards the mortgage. The lender can offer very attractive interest rates fixed for 15 years. You will have to show a credit history report, but even with poor credit you may still be able to qualify for the home loan. There is also no maximum purchase price, but your lender will calculate how much you can afford before providing you the loan.
Before you can begin to calculate how much mortgage you can afford to pay, you should find out whether your income qualifies for USDA home loan and whether your income lies within the USDA Loan Income Limits. The home loan programs are designed to help low and moderate income families. There will be some restrictions on where you can purchase your home, as well as how much your maximum income should be.
The official USDA website also offers state and county-wise eligibility information that you can find out for single family homes. Eligibility is based on household information, gross monthly income, child care expenses etc. For more information on these loans, you can visit USDA Loans: Information and FAQ at the official website.
How much home loan you can afford should be calculated with the help of a number of online calculators, based on your monthly income, debt profile and down payments. In general, if you are considered “low income” then your mortgage payment cannot go over 33% of your income and your total debt cannot exceed 41%.