Content of the material
- Please update your browser
- Find Affordable Housing
- Home Affordability Calculator
- What’s the Process for Getting a Mortgage with Quicken Loans?
- What to Do If You Get Turned Down
- Affordability and your debt-to-income ratio
- Front-end DTI: Your housing expenses
- Back-end DTI: Your total debts
- DTI budgeting example
- Factors that impact affordability
- Minimum Borrower Requirements
- Minimum Credit Score
- Minimum Down Payment
- Maximum Debt-to-Income (DTI) Ratio
- How It Works
- Average rates from other lenders
- Front-End Ratio vs Back-End Ratio
- Front-End Ratio
- About Chase
- What Can You Do Online with Quicken Loans?
- Related Resources
- Home Buying Process Overview
- What’s The Real Cost Of Buying A Home?
- 45 Tips For Home Buyers
Please update your browser
We don’t support this browser version anymore. Using an updated version will help protect your accounts and provide a better experience.
Find Affordable Housing
Buying a home can be expensive. The U.S. Census Bureau stated that the median price of a home in the United States was $321,500 in 2019, while the average price was $383,900. If you live in large metropolitan areas like New York, San Francisco or Los Angeles, you can expect to pay significantly more.
Historical United States median and average housing prices including land are published below.
|Period||Median||% Change||Average||% Change|
Understanding whether you can afford to buy a home depends on much more than just the selling price. Unless you’ve spent the last several years socking away everything you’ve earned, or you’ve come into a large inheritance or won some money, chances are good that you’ll need to get a loan to pay for your home.
The Freddie Mac Primary Mortgage Market Survey for October 8, 2020 stated the average 30-year fixed-rate mortgage charges 2.87% with 0.8 fees / points.
If you pay for the points upfront with other closing costs, and put 20% down on a home priced at the 2019 average you would need to save $76,780 while obtaining a loan for $307,120. Over the life of the loan you would need to repay the amount borrowed along with $286,406 in interest, for a total repayment of $593,526.
Interest rates charged to any individual borrower can fluctuate based upon:
- financial market conditions
- local real-estate and environmental related risks
- the size of your down payment
- length of loan term
- fixed or adjustable rate loan structure
- employment history & stability
- debt-to-income ratio
- outstanding credit score issues
- any past bankruptcies
- credit score
Home Affordability Calculator
The Rocket Mortgage® Home Affordability Calculator gives you the option to see how much house you can afford, or how much cash you need for your down payment and closing costs.
If you’re looking into how much home you can afford, just enter your location, yearly income, monthly debts and how much money you have for a down payment and closing costs. The calculator will take this information and tell you how big of a loan you can take.
On the flip side, if you have a price in mind, you can use the calculator to see how much cash you’ll need for a down payment and closing costs.
What’s the Process for Getting a Mortgage with Quicken Loans?
You can apply for a mortgage with Quicken Loans online or over the phone. You’ll be matched with a Home Loan Expert who will guide you through the mortgage process. After your credit score is pulled, you’ll get a loan estimate (or a prequalification letter) via the site’s loan portal, MyQL.
To continue the mortgage process, you’ll need to submit a deposit which covers costs incurred to process your credit report, appraisal and title work. When you close on a house, this deposit is credited against your total closing costs. Quicken Loans says that the amount of this deposit varies between $400 and $750. Your Quicken Loans Home Loan Expert will let you know what you owe. You can use credit, debit, pre-paid Visa or MasterCard gift cards to pay the deposit, but not checks, money orders or cash.
You can also get a credit toward your closing cost by opting for a higher interest rate when you get a mortgage from Quicken Loans. Quicken Loans calls this option the “Closing Cost Cutter.” If a lack of ready cash is your problem and you want to reduce your closing costs, the Closing Cost Cutter may be an appealing option. However, it’s important to understand that opting for a higher interest rates means you’ll have a higher monthly payment and pay more interest over the term of the mortgage.
Once Quicken Loans has verified your credit and assets you may be pre-approved for a loan. At any time between applying for a loan and closing on your home you can get in touch with a Quicken Loans representative by email, fax or phone. If you use Quicken Loans’ Rocket Mortgage you can apply for a loan entirely online and authorize Quicken Loans to import financial information (such as your checking account balance) for you so you don’t have to upload them yourself. If you start an online application through Rocket Mortgage and then realize you want to speak to a human you have that option at any point in the application process.
What to Do If You Get Turned Down
While the company has long been a technological innovator, it mainly offers inside-the-box financing. There’s a good chance you’ll need to take steps to improve your credit score, reduce your debt or increase your income to qualify with Rocket Mortgage if your application is denied. The more you can accomplish in these areas, the more likely you are to not only get approved but get a better rate. Don’t forget to look into the Fresh Start Program.
If you’re in a hurry, however, you may be able to get approved with a different lender that has looser criteria. A lender that offers non-QM loans may be able to meet your needs if you’re willing to pay a higher interest rate.
Getting a co-signer or co-borrower may be an option, but asking someone to take on a mortgage with you is no small commitment, especially if this person is not residing in the home. To get an idea of what you can afford without help, use our mortgage calculator.
Before you figure out your next steps, it’s a good idea to apply with several mortgage lenders to see where you stand. Don’t worry about hurting your credit score: Submitting multiple applications within 45 days will have the same impact on your score as submitting a single application, according to the Consumer Financial Protection Bureau (CFPB).
Affordability and your debt-to-income ratio
Mortgage lenders use a shortcut to calculate mortgage affordability. They look at a number called your ‘debt-to-income ratio’ (DTI).
DTI shows your monthly debt burden as a percentage of your gross (pre-tax) monthly income. There are two components to your DTI:
|What’s Included?||Affordable Range|
|Front-End DTI||Housing expenses only||28%|
|Back-End DTI||Housing expenses and other monthly debts||36-43%|
Looking at your debt-to-income ratio helps lenders determine a) how much wiggle room you currently have in your budget, and b) how much mortgage you can afford with your existing cash flow.
Above, we mentioned the ‘28/36’ rule of thumb for determining affordability. In this formula, 28% is the target front-end DTI, while 36% is the target back-end DTI.
Front-end DTI: Your housing expenses
Your “front-end” DTI looks only at your housing costs compared to your income. As mentioned above, lenders typically want to see a front-end DTI of 28% or lower — meaning your monthly housing costs don’t exceed 28% of your monthly gross income.
Housing expenses that count toward your DTI include your mortgage payment, homeowners insurance, and property taxes, as well as private mortgage insurance and homeowners association fees if applicable.
Back-end DTI: Your total debts
Your “back-end DTI,” on the other hand, counts your mortgage and other existing debts against your income. In other words, this is a measure of your total monthly debt load to see how much house you can afford on top of your other financial obligations.
Lenders see 36% as a ’good’ back-end DTI, but often allow debt ratios as high as 43% or even 45% for mortgage qualifying.
Expenses that count toward your back-end DTI include housing expenses (listed above) as well as payments on installment loans (auto, student, personal loans …) and minimum credit card payments. You must also include things like child support and alimony.
Your DTI does not include living expenses that vary month-to-month; things like food, dining out, gas, utilities, cell phone bills, and so on. So do not add these to your other debts when calculating your DTI.
DTI budgeting example
Calculating your DTI can help you work backward to determine how much house you can afford.
For example, let’s say you earn $7,500 per month before taxes. And you currently pay $700 per month toward a car loan and minimum credit card payments.
If you’re aiming for an ‘ideal’ back-end DTI of 36%, you can spend a total of $2,700 per month on all your debts including your mortgage. ($2,700 is 36% of $7,500.)
Since you already spend $700 per month on existing debts, that leaves $2,000 per month for a maximum mortgage payment. Plug that number into the “By monthly payment” calculator above and you can roughly estimate your home buying budget.
Keep in mind that the lower your DTI is, the lower your mortgage rate is likely to be — and the higher home price you can afford. So, if possible, try to reduce yours before you apply.
Factors that impact affordability
When it comes to calculating affordability, your income, debts and down payment are primary factors. How much house you can afford is also dependent on the interest rate you get, because a lower interest rate could significantly lower your monthly mortgage payment. While your personal savings goals or spending habits can impact your affordability, getting pre-qualified for a home loan can help you determine a sensible housing budget.
Minimum Borrower Requirements
Here are the basic criteria Rocket Mortgage requires borrowers to meet.
Minimum Credit Score
Rocket Mortgage’s minimum credit score requirements are:
- 620 for a conventional loan
- 580 for an FHA loan
- 580 for a VA loan
- 680 for a jumbo loan
If your score is lower and you want to get a mortgage with bad credit, one option is to look for lenders who offer nonqualified mortgages.
Another is to participate in Rocket Mortgage’s free Fresh Start program, which has no minimum credit score requirement. According to a company spokesperson, participants work with a licensed mortgage banker who specializes in credit for the purpose of a mortgage.
The banker will look at your credit report to identify the most impactful actions you can take to improve your credit to qualify for a home loan, such as paying down debt or paying off collections. While it will be your responsibility to call your creditors, the Fresh Start program can work with the credit bureaus to update your credit score quickly and remove accounts in dispute from your credit report.
Minimum Down Payment
Down payment requirements are minimal: 0% for VA loans, as little as 3% for certain conventional loans, and 3.5% for FHA loans.
Maximum Debt-to-Income (DTI) Ratio
The maximum DTI that Rocket Mortgage allows depends on the type of loan you’re applying for and the other aspects of your finances.
Loan type Max DTI Jumbo 45% Conventional 50% VA 60% FHA Determined by automated underwriting system
How It Works
The home affordability calculator is very easy to use. It will walk you through a few screens that will ask about your annual income, monthly debts, location, and available funds for a down payment. After that, you’ll find out how much you can afford to spend on a home within a few seconds.
You’ll see the breakdown of what you can afford to help you make a good decision about your home purchase. In the green, you’ll find home prices that you can comfortably afford. In the yellow and red, you’ll find home prices that would be a stretch to afford or are too far out of reach.
On the right of the page, you’ll see a convenient breakdown of a sample monthly budget that includes your new mortgage payment, current monthly debt, and the funds left over to use for other expenses. With this useful breakdown, you’ll be able to decide what size home purchase is in your best interest.
Average rates from other lendersRefinance rates
Add your home details to see if we have rates for you from our lender partnersCheck for ratesPurchase rates
Add your home details to see if we have rates for you from our lender partnersCheck for rates
Front-End Ratio vs Back-End Ratio
Two criteria that mortgage lenders look at to understand how much you can afford are the housing expense ratio, known as the “front-end ratio,” and the total debt-to-income ratio, known as the “back-end ratio.”
The housing expense, or front-end, ratio is determined by the amount of your gross income used to pay your monthly mortgage payment. Most lenders do not want your monthly mortgage payment to exceed 28 percent of your gross monthly income. The monthly mortgage payment includes principle, interest, property taxes, homeowner’s insurance and any other fees that must be included. These costs are commonly referred to as PITI, which is derived from: pincipal, interest, tax & insurance.
FRONT END RATIO FORMULA: FER = PITI / monthly pre-tax salary; or FER = PITI / (annual pre-tax salary / 12)
To determine how much you can afford for your monthly mortgage payment, just multiply your annual salary by 0.28 and divide the total by 12. This will give you the monthly payment that you can afford.
Many lenders place more emphasis on the back-end ratio than the front-end ratio. In the next section we will display a table of widely used loan programs, along with the limits associated with each.
Chase Bank serves nearly half of U.S. households with a broad range of products. To learn more, visit the Banking Education Center. For questions or concerns, please contact Chase customer service or let us know at Chase complaints and feedback.
What Can You Do Online with Quicken Loans?
Quicken Loans has no physical branch you can visit, so the company puts a lot of effort into its online presence and features. For example, you can check out live mortgage interest rates on the Quicken Loans website.
To attract customers who like to do everything online, Quicken Loans offers Rocket Mortgage. Rocket Mortgage is an online portal from Quicken Loans that finds, imports and verifies financial information, and lets you customize your mortgage (purchase or refinance), see if you’re approved and lock your rate – all without speaking to a person. It’s a quick, online-only option for the phone-phobic.
If you don’t use Rocket Mortgage you’ll be able to start your application online but will need to speak with a Quicken Loans rep over the phone to move your mortgage application forward. You can also bypass the website altogether and go straight to the phone to start your Quicken Loans mortgage process.
Whether you opt to use Rocket Mortgage or Quicken Loans’ regular application process, you can access your Quicken Loans account online through their portal, MyQL. You’ll be able to check the status of your loan online at any time, 24/7. There’s also a MyQL mobile app.
Viewing 1 – 3 of 3
Home Buying Process Overview Home Buying 4-minute read Sarah Li Cain November 29, 2021 We’ve written this guide to give you an overview, including what you need to buy a house and how the steps work, to make it all feel more manageable. Read More
What’s The Real Cost Of Buying A Home? Home Buying 15-minute read Kevin Graham February 01, 2022 We’d be lying if we didn’t acknowledge that buying a home can be a significant investment both up front and over time. If you’re considering taking the financial plunge into homeownership, here are the costs you should expect going into the process. Read More
45 Tips For Home Buyers Home Buying 9-minute read Victoria Araj February 01, 2022 Looking to buy a home soon? Here are 45 tips to help you through the entire home buying process. Read More