How Much House Can You Really Afford?

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Deciding How Much House You Can Afford

Credit Score 

It’s a good idea to get your credit in order before you apply for a mortgage. First, check your credit report at one of the big three agencies: Equifax, Experian, and TransUnion.  Copy & Paste or Click the Link below to get one Free Copy per year:   https://www.annualcreditreport.com/index.action Carefully review your report and note any incorrect information and negative factors.  If you find mistakes on your report, be sure to alert the credit reporting agency right away. Be aware, you might have to prove that the claims are wrong by providing payment history or other evidence.  If it’s a case of identity fraud, then you will have to file a report with your local police department. 

What percentage of income should go to a mortgage?

If you’re not sure, Copy & Paste or Click the Link below for information:  https://www.bankrate.com/mortgages/what-percent-of-income-should-go-to-mortgage/ follow the tried-and-true 28/36 percent rule.  Most financial advisers agree that people should spend no more than 28 percent of their gross income on housing (i.e., your mortgage payment), and no more than 36 percent of their gross income on total debt, including mortgage payments, credit cards, student loans, medical bills and the like.

Here’s an example of what this looks like:

Joe makes $60,000 a year. That’s a gross monthly income of $5,000 a month.
$5,000 x 0.28 = $1,400 total monthly mortgage payment (PITI)

Joe’s total monthly mortgage payments — including principal, interest, taxes and insurance — shouldn’t exceed $1,400 per month.  That’s a maximum loan amount of roughly $253,379.

You can qualify for a mortgage with a DTI ratio of up to 50 percent for some loans, but you might not have enough wiggle room in your budget for other living expenses, retirement, emergency savings and discretionary spending if you stretch yourself too thin. Lenders don’t take those budget items into account when they are approving you for a loan, so it’s up to you to factor those expenses into your housing affordability picture for yourself. Copy & Paste or Click  the 2 Links below for information:  https://www.bankrate.com/mortgages/pre-approval/

Knowing what you can afford can help you take financially sound next steps. The last thing you want to do is jump into a loan https://www.bankrate.com/mortgages/30-year-mortgage-rates/ that’s too expensive for your budget, even if a lender is willing to loan you the money.

A mortgage calculator is a springboard to helping you estimate your monthly mortgage payment and understand what it includes. Your next step after playing with the numbers is get Preapporved by a Mortgage Lender https://www.bankrate.com/mortgages/first-time-homebuyer-loans-and-programs/

Applying for a mortgage will give you a more definitive idea of how much house you can afford after a lender has vetted your employment, income, credit and finances. You’ll also have a clearer idea of how much money you’ll need to bring to the closing table.  Learn more about specific loan type rates.  https://www.bankrate.com/mortgages/30-year-mortgage-rates/

 We also help Buyers get Proof of Funds Letter, if needed - $115k to $1 Million.  Click the link below: 

http://besttransactionfunding.com/index.php?ref=GlobalInformationGroup