Determining how much home you can afford, or what payment you feel comfortable with, can be frustrating.
Start with a good self assessment of how much you are comfortable devoting to your housing costs each month and then get professionally pre-approved for a mortgage. With that personal budget in mind, you’ll benefit from some additional initial mortgage-rate research both online and with live contacts to reputable lenders, preferably those referred to you by your Realtor or possibly a trusted banker. Mortgage rates are volatile and mortgage loan programs numerous and varied. Thus, choosing the right lender who can advise you on the latest update to the ever-changing rates as well as provide the pros and cons of the loan options is essential to selecting the best path forward.
Once your lender is identified, the clearest picture of how much home you can actually qualify to borrow will be based upon an assessment of your assets (Including how much down payment you will contribute and funds to cover other closing costs), credit history and ability to repay. Your lender can calculate your income-to-debt ratio, obtain your credit scores and with some financial information that you provide, evaluate the amount of loan the lender believes you can obtain. Typically, lenders prefer an income-to-housing cost ratio not exceeding about 28% of gross monthly income. This 28% does not consider overall long term monthly debt which can typically go as high as 36% of income. This means you can spend up to 28% of your gross monthly income on a mortgage payment, and no more than 36% of your gross monthly income on all forms of debt, mortgage included.
To learn more about these local programs, our recommended lenders, and other finance options, contact us today!
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