The FHA caps borrowers' house payments at 31 percent of gross (pretax) monthly income. So, if you earn the median household income of $4,200 a month before taxes, your house payment, including principal, interest, taxes, insurance and association dues, should be no more than 31 percent of that, or $1,302. Some housing counselors say you should spend less -- around 28 percent to 30 percent of gross income.
The FHA limits total debt payments to 43 percent of monthly income. Total debt payments include first and second mortgages, auto loans, credit cards and child support. Some non-FHA loans let you borrow more, but you don't have to stretch.
"Expectations to grow into a payment ought to be scaled back until the economy is into a full recovery," says Jim Sahnger, mortgage planner for Palm Beach Financial Network in Stuart, Fla.
Small down payment? Go FHA.Most lenders require buyers nowadays to make down payments of at least 10 percent. Similarly, most lenders require homeowners to have at least 10 percent equity to qualify for a low-rate refinance.
For people who don't have the 10 percent, the FHA is an option. To get an FHA-insured mortgage, you need a down payment, or equity, of at least 3.5 percent.
No down payment? Go VA or RHS.The Department of Veterans Affairs guarantees no-down payment mortgages in the VA Guaranteed Home Loan Program. To meet eligibility requirements, you must provide proof of military service.
The U.S. Department of Agriculture's Rural Housing Service doesn't require down payments, either. The eligibility requirements include restrictions on income as well as property location.
Check rates on jumbos.Jumbo mortgages were a casualty of the credit crisis that began in the summer of 2007. Jumbo rates soared and remained high for more than two years. But at the end of 2007, rates on jumbo mortgages began falling. Toward the end of 2009, rates on fixed-rate, 30-year jumbos dropped to around 6 percent. Jumbo ARM rates also fell. For homeowners with at least 20 percent to 30 percent equity, refinancing is worth a look.
If you fall behind, consult a counselor.Delinquent borrowers who receive foreclosure counseling are 60 percent more likely to keep their homes than people who don't get counseling, according to NeighborWorks America. They also are more likely to receive mortgage modifications and lower payments.
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