Buying a house, how much home can you afford?
Buying a house: what to consider?
When making the decision to buy a home, there are many things to consider. Before you even start to look for that dream house, you need to think about how much house you can afford. If you are renting, you already have an idea of how to budget and manage your monthly expenses every month. Things will be quite similar with a house only your payments go toward something tangible and you will have to consider things such as taxes and home owners insurance.
What mortgage can you afford?
A mortgage adviser or real estate agent will probably tell you to start in the range of 3 to 3.5 times your annual gross salary. So if you make $50,000 a year, those are homes in the region of $150,000 to $175,000 a year. If you are adding your spouse or partners income to the mortgage they usually lend between 2.5 and 3 times the combined gross annual salaries.
Factors to get a home mortgage loan
Remember, these are only guidelines. There is a lot of flexibility in both directions on the amount. A mortgage company will look at a few factors before deciding if they will give you a loan to begin with and how much they are willing to lend you. If you have other commitments such as credit cards, loans, car payments and other expenses, the mortgage company will have to consider this.
Credit scores influence mortgage loans
The mortgage lender will also look at your credit score. If your credit score is low, you may have a problem getting the full amount of financing you want. If your credit is high then this will only help you.
There are many factors in deciding how much home you can afford. A mortgage company weighs the risks factor in the amount that they will loan you in nearly the same way they decide whether or not to give you the loan. Smart budgeting is essential when purchasing a home. Remember, you have a lot more to lose.
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What you need to know about Loan Documentation There are 3 basic types of loan documentation. Below is a list and a brief description of why borrowers use them Full Documentation - In this case you supply a current pay-stub and past 2 years W-2s. The lender will call to verify your employment for the past 2 years at...
Important home purchase related terms Pre-qualified - this is when a mortgage consultant reviews your credit, income and assets to determine what mortgage amount you can afford. This is the first step in the home buying process, most realtors will request a pre-qualification letter prior to showing you properties. 100% Financing - financing option which allows buyers to purchase without...
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