How Much Home Can I Afford?

How Much Home Can I Afford Article

A lot of key elements are evaluated when figuring out how much home you can afford. The best way to know the amount is with a pre-approval.

Mortgage lenders will investigate a borrower’s gross income, debt-to-income ratio (DTI), credit scores, and savings to issue a pre-approval. The pre-approval letter will provide the loan amount, type, and terms available to the borrower. Mortgage lenders will investigate the financial standing of a borrower and how much debt they can take on before providing a mortgage amount.

Elements such as debt, down payment, and future mortgage payments (the terms and interest rates) can also greatly help borrowers know their affordability. Borrowers also need to incorporate the expenses beyond the finalization of the housing loan, such as closing costs, property taxes, homeowner’s insurance, and any association costs in their calculation.

How much home a borrower can afford may sound extensive but evaluating and creating a budget when you become interested in purchasing a home will help you organize and create a sense of ease during the process. It is just as important to continue budgeting after you get a mortgage.

Additional Affordability Tips:

  • Shop around for loan types and options.
  • Shop around for homeowners’ insurance.
  • Set aside funds for home maintenance.
  • Set aside funds for emergencies.
  • Stay within your budget.

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