Home sales are growing, and home prices are increasing. In fact, according to the National Association of Realtors®, in July existing home sales in the South increased by 4.1% annually, and the median house price in the South was $203,500, up 7% from a year ago.

With home sales on the upswing, many people are considering home ownership, and wondering how much income they need to qualify for a Florida mortgage. It’s a good idea to get pre-qualified before you start shopping for a new home, and your mortgage lender will ask you questions about your employment and finances to help you find out how much home you can afford.

Crunching the Numbers

Generally speaking, your housing expenses (which include your mortgage payment, insurance, and property taxes) should not exceed 28% of your gross income. This rule isn’t absolutely fixed, and your lender will also look at other long-term debts, like car or college loans. Ideally, your lender will want your total debt-to-income ratio to be 36% or less of your gross income.

Let’s look at a simplified example. Assume you’re looking at a house that is exactly the current median value for homes in the South, $203,500. You’ve saved up a 5% down payment, $10,175. So you need to borrow $193,325, and you find a 30-year mortgage at 4.5% fixed-rate interest. If you have no significant debt liabilities, your required annual income would be $41,981, and your maximum monthly payment (including principal, interest, tax, and insurance) would be $979.55. It can get complicated to calculate these numbers, but there are a number of online calculators you can use.

Altering the Variables

Any other debt would change that picture. If you have a car payment of $350 each month, with a student loan payment of $200, your required annual income would go up to $50,985, with a monthly payment of $979.55.

Any of these variables are subject to change, of course. An FHA loan may require less than a 5% down payment, for example, or you may have found a lower interest rate. You may have additional debt, like credit cards, but you also may have a co-borrower who has his or her own income. You may be able to provide a larger down payment. All of this information will factor into the income you need to qualify for your mortgage.

Talk to Your Lender

While all this may seem intimidating, particularly if you’re a first-time home buyer, your mortgage lender can help. An experienced mortgage lender will help you organize your financial information and work with you to reach a monthly mortgage payment that you can afford. At Embrace Home Loans, we work with Florida home buyers every day to help them find a Florida mortgage that meet their needs. Call us at 407-733-6425, or browse our website to find out more.