Some Facts To Help You Determine Your Home Affordability
Lowest Mortage Rates by · Leave a Comment
Before applying for a loan to get a home, you should ask yourself – “How much home can I afford?” The answer will let you know the range of homes you can afford.
4 factors lenders consider when determining your ability to repay
• Monthly gross income: The more your monthly gross income is, the more expensive home you can afford.
• Credit score: A high credit score means you can apply for a greater loan amount.
• Down payment: If you can pay 20% of the sale price as upfront money, then, you don’t have to pay for private mortgage insurance (PMI).
• Monthly repayment: The amount you can afford for monthly repayment, calculating your monthly debt amount (like auto loan, credit card bills etc). The more your debt amount is, the less expensive home you can afford.
Some tips to follow before you apply for a loan
There are some factors which you need to keep in mind before you answer the question: “How much home can I afford?”
If you buy a large house with garage and duplex facility, then, it will increase your buying power. You can rent out a part of your home and the rent you will get can be a part of your monthly repayment.
It will be wiser to go for a 30-year loan, because, monthly repayments will be much lower and you can qualify for a bigger loan. You can also make prepayments to pay off the loan in 15 years.
You also need to keep in mind the closing costs you need to pay.
If you are thinking, “How much home can I afford?”, you can take help of mortgage affordability calculator which will enable you to estimate a loan amount based on your income, debt, down payment etc.
