| Assume Downpayment Amount |
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Subtract the downpayment from the
home purchase price to get the
mortgage amount
Example: 10% downpayment on a
$250,000 home - $250,000 - $25,000 =
$225,000 mortgage |
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| Calculate Monthly Principal and Interest |
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Use interest rate and mortgage term
(30 years) to get monthly Principal
and Interest payments from:
Online calculator:
Example: P&I for a $225,000 mortgage
at 5% = $1,207.85/month |
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| Add Monthly Taxes and Insurance |
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Add monthly taxes and insurance
figures to monthly principle and
interest amount
Example: Taxes and Insurance =
$325/month - $1208 + $325 = $1533
Total Monthly Payment |
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| Calculate Annual Housing Cost |
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Multiply Total Monthly Payment
by 12 to get Total Annual Housing
Cost
Example $1533 X 12 = $18,396 |
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| Calculate Income Needed to Qualify for Loan |
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Assume housing costs are no
more than 28% of income. Divide
Total Annual Housing Costs in
step 4) by .28
Example: $18,396/.28 = $65,700
You have to earn at least this much to
qualify for a mortgage. |
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| Compare the Salaries of Your Selected Occupations |
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ARE SALARIES SUFFICIENT?
Teacher - $58,460 < $65,700
Bank Teller - $25,418 < $65,700 |
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| What Working Families Need To Earn To Afford Rental Housing |
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| CALCULATIONS |
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HOW TO DO THEM |
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| Do Separate Calculations for 1- and 2-bedroom Units |
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Multiply monthly rents by 12 to
get Annual Rents
Example:
1 BR @ $750/month X 12 = $9,000
2 BR @ $900/month X 12 = $10,800 |
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| Determine Income Needed for Rent to be Affordable |
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Divide the rent by .30
This calculates the amount you need to
earn annually so the rent is “affordable” -
no more than 30% of income
Example:
1 BR @ $9,000/.30 = $30,000
2 BR @ $10,800/.30 = $36,000 |
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| Convert Hourly Wages Needed to be Affordable |
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Divide the annual amount needed
from step 2) by the hours typically
worked in a year (2080)
Example:
1 BR @ $30,000/2080 = $14.42/hour
2 BR @ $36,000/2080 = $17.30/hour |
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| If wage data is annual convert to hourly |
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Divide annual wages by 2080 to get
hourly wages.
Example:
Nurses Aid - $23,943/2080 =$11.51
Teachers Aid- $22,069/2080 =$10.61 |
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| Compare the wages of your |
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ARE THE WAGES SUFFICIENT TO
RENT A 1-BR OR 2-BR UNIT?
Example:
Nurses Aid - $11.51 < 1-BR @
$14.42 or 2-BR at $17.30
Teachers Aid - $10.61 < 1-BR @
$14.42 or 2-BR @ $17.30 |
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| Information Needed for a Paycheck to Paycheck Analysis |
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| Information |
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Where to Get It |
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Home Prices
- Use median or range of prices
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- Housing Virginia Data - www.housingvirginia.org
- REALTORS can get from MLS data
- Homebuilders from price of new homes
- Advertised homes in local papers
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Interest Rates
- Add 45 basis points to interest
rate if downpayment is less
than 20%
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- Federal Home Finance Board website www.fhfb.gov and click on Mortgage Interest Rate Survey
- Local lenders
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Taxes and Insurance
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- Virginia Economic Development Partnership website -
www.virginiaallies.org/assets/files/publications/local_taxes_guide.pdf
- Insurance from local insurance representative
- Estimate monthly amount for both items by multiplying the home price by a number ranging from .0015 (low cost) to .0025 (high cost)
- Tax from local assessor's office or local government website
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Rents
- Add utility costs if applicable
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Wages
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- Virginia Economic Development Partnership website - Community Profiles - www.yesvirginia.org
- Individual local employers
- Government' Occupational Earnings and Wage Estimates by metro area and zip code www.bls.gov
- Commercial data by metro area or zip code www.salary.com
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