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How Much House Can You Afford?
Knowing what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. It pays to check with several lenders before you start searching for a home.
The price you can afford to pay for a home will depend on several factors, such as:
- gross income
- the funds you have available for the down payment, closing costs and cash reserves required by the lender
- your debt
- your credit history
- the type of mortgage you select
- current interest rates
Another figure lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI).
Each buyer is unique. A mortgage professional can help you find out just what you can afford. Your income and your debts will typically play the biggest roles in determining your price range.
Similar-sounding terms can have vastly different meanings. Whether a buyer is "pre-approved" or is merely "pre-qualified" for example, can make a huge difference in the length of time it may take your home sale to close. Buyers who are “Pre-Qualified” are those whose lenders have determined how much they can borrow based only on information the buyer has provided to the lender. Nothing has been verified to determine the buyer's true creditworthiness. The buyer still must fill out a loan application and go through the lender's approval process. Buyers who have been "Pre-Approved" the lender has already done a credit check along with verification of employment and deposit.
Become A Power Buyer Get Pre-Approved Today! The lender's pre-approval is a commitment to loan the buyer up to a certain predetermined amount.
Become A Power Buyer
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