Question: another $2,300 on a truck @ 249.00 month, and $239.00 month for house > payment. Besides living expenses that’s it. I make in US $ take home > of $320.00 a week. I live in the Northern U.S. and I’m planning on > living in the house for a while if I can ever get all of the problems > fixed. Would a HECL require a second morgage as security?
Answer: Your take home isn’t usually the interesting figure, start with your gross pay. Part of the reason for this is that take home can vary voluntarily – you could be contributing to a 401k or other pension plan, or be buying additional insurance at work, for instance. Either would reduce your take home pay, but you could presumably reduce or stop either or both, which would increase your take home pay.
So you start with your gross pay. Generally, your mortgage payment can’t be over 28% of your gross pay. So multiply your gross pay by .28. The resulting figure is probably going to be pretty close to what a bank is going to wnat to limit your payment to. This payment has to cover principal repayment, interest, property taxes, insurance, and maintenance fees (for condos or homeowner associations). How much money that means you can borrow depends on the interest rate.
Now take your gross pay and multiply it by .36. This result is the amount that has to cover all debt repayment – the total monthly payment on all existing loans, plus the monthly payment on the mortgage, plus the property taxes, insurance, and maintenance fees.
If you can’t pass BOTH of these tests, chances are you’re going to have a hard time getting approved for a home loan. And yes, a home equity loan or line of credit is secured by a mortgage on your home – that’s why it’s called a *home* equity loan instead of something else.
Since you didn’t tell us your gross pay, you’ll have to figure it out for yourself, but if we assume more or less normal ratios between take home and gross pay, it looks like your monthly debt burden is over 50% of your gross pay before we consider the credit card payment. Lenders sometimes play fast and loose with these ratios but there are limits. I wouldn’t lend you another dime until you got your finances under somewhat tighter control – it’s not surprising that you have to “beg” for a loan. What is surprising (to me at any rate) is that you got it – if you weren’t a home town boy with a long history at that bank, I doubt that loan officer would have done you the favor of granting the loan.
And again, the word is “mortgage” (when you say it, the “t” is silent) not “morgage”.
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