Mortgage

What Can I Afford?

Once you know what you're looking for, the next step is to determine what type and size of home your budget will allow. A review of your income, monthly expenses, savings, and debt will be essential.

Before you begin touring homes, you'll want to get pre-qualified for a mortgage loan. A pre-approval is a straightforward estimate done by a mortgage lender that lets you know the amount you'll be approved to borrow and what your monthly payment will be. It also implies to the seller that you are serious and can afford to buy the property. When there are other interested buyers, it enables you to move swiftly when you find the right home.

Several factors influence the price you can afford to pay for a home, such as:

• Your available resources toward down payment and closing costs
• Gross income
• Your credit history
• Your debt
• Current interest rates
• The type of mortgage you select

Another number that lenders use to evaluate how much you can afford is the housing debt-to-income ratio. It is established by calculating your projected monthly housing expense, which consists of the principal and interest payment, property tax, and insurance premiums on your mortgage loan (also known as PMI).