The Montgomery County First Time Homebuyers Program does not have a maximum sales price, however each applicant will have a maximum sales price based on their income and debt determined using front-end and back-end ratios.
Front-End Ratio:
The front-end ratio is based on your housing expenses. It includes your mortgage payment (principal, interest, taxes, and insurance) and any HOA or condo fees. The front-end ratio should not exceed 33%.
Example: If your monthly gross income is $5,000, your housing expenses should not exceed 33%, which is $1,650.
Back-End Ratio:
The back-end ratio includes your total monthly expenses, such as housing costs, credit card payments, auto loans, etc. For a $5,000 monthly income, the total monthly debt payments should not exceed 41%, or $2,050.
Example: If your estimated mortgage payment is $1,650 and your total monthly expenses are within the $2,050 limit, then you meet the guidelines.
How to Calculate the Sales Price:
One easy way to calculate the maximum sales price is to ask ChatGPT. For example, simply type:
“My monthly gross income is $5,000. My front-end ratio can’t exceed 33%. How much is the maximum sales price? The estimated taxes are $4,000 per year and insurance is $1,500 per year. Please use an average 30-year conventional 20% down mortgage rate for a primary residence.”
ChatGPT will then provide the maximum sales price. In this case, the maximum sales price was $235,750 based on a rate of 6.5%.
Breakdown:
- With a $5,000 monthly gross income and a 33% front-end ratio, your total housing expense is $1,650/month.
- After subtracting about $458/month in taxes and insurance, you have roughly $1,192 available for mortgage principal & interest.
- Under a 30‑year conventional mortgage (20% down) at an average rate of about 6.5%, that payment supports a loan of roughly $188,600, which translates to a maximum sales price of about $235,750.
Example: If your household income is $90,000 a year, assuming property taxes of $5,000/year and insurance of $1,500/year, the maximum sales price is approximately $382,800.
Breakdown:
- With a $90,000 annual income (i.e., $7,500/month), 33% of your monthly income is $2,475 for total housing expenses.
- After subtracting about $541.67/month in taxes ($5,000/year) and insurance ($1,500/year), roughly $1,933/month remains for mortgage principal and interest.
- At a 30‑year conventional mortgage (20% down) at about 6.5%, this supports a loan of approximately $306,250. Since that represents 80% of the purchase price, the maximum sales price comes to about $382,800.
If you’d like to verify these calculations on your own, you can use a mortgage calculator (just type “mortgage calculator” into your search engine). Enter the estimated home value, down payment, taxes, insurance, and any HOA fees. Just make sure your total monthly payment is less than 33% of your monthly gross income. If it exceeds 33%, simply reduce the sales price and recalculate.
If this is too difficult, do not worry. You will receive a letter of intent that includes the sales price and loan amount after counseling from the Housing Programs Manager.
Are you ready to apply?
Before you apply, be sure to review these articles:
- What Is the First-Time Homebuyer Grant in Montgomery County, PA?
- Key Requirements for the Montgomery County, PA First-Time Homebuyer Grant
- What Happens After You Apply for the First-Time Homebuyer Program in Montgomery County, PA
Need More Information?
Visit the official county website for additional details: Montgomery County First-Time Homebuyer Grant.
Note: This article was revised in February 2025.