Most people nowadays when interested in buying a new home, or possibly their first home, will ask, how much home can I afford? This is a great question to start with, as you should speak to your lender, NSH Mortgage, to get pre-approved before spending countless hours out with a realtor searching for the right home. If you get pre-approved you will know the amount you are eligible for spending on a home purchase. Just because you are eligible to have a mortgage up to a certain amount doesn’t mean to use it all. A debt-to-income ratio can be the main factor for revealing how much home you can really afford when buying a house. Speak to your mortgage lender, NSH Mortgage, about “How much home can I afford?”, as they will lead you to the right amount to spend on your home loan.
How Much Home Can I Afford?
Everyone lately has been talking about credit score, credit score, and credit score. Your three-digit FICO credit score is a good start to be clear on the fact that you have good enough credit to even be in the ballpark for buying a home.
The real test though, when buying a home, is your personal debt-to-income ratio. Your DTI is a relation between your income and your current monthly payments. Mortgage lenders want to confirm that you can take on a sustainable housing payment, on top of the other payments you currently have to pay out every month. It is a good thing for both parties, before heading into a contract that could crumble.
It is not necessary to know your debt-to-income ratio before applying or speaking to a mortgage lender, but it will be a good point to see after speaking with someone and getting serious in the home buying process.
You Have A Unique Debt-To-Income Ratio & Your Mortgage Lender Can Tell You Why
Do not assume that just because you have a lot of outgoing payments or debt every month means that you are scratched off the list of receiving a home loan for purchasing a home. It would be difficult for a person with $2,000 in monthly payments every month only making $3,000 per month to be approved for a home loan. On the contrary, a different person with $4,000 in monthly debt, who makes $18,000 per month, even with more debt per month, will have a much easier time getting approved, and for more home, because of the income.
That is what makes every single person’s DTI different and unique. It is not always off how much money you are putting out per month, but how much is coming in to counter balance that.
Calculating My DTI To Determine How Much Home Can I Afford
Mortgage lenders will calculate your debt-to-income ratio for you, and results from that will determine how much home you can afford. It is though, important to understand how they calculate this. NSH Mortgage will look at your recurring payments for anything financed. This means that car payments, students loans, credit card purchased, and any child care or alimony payments will count towards this total.
Cell phone bills, utility payments, and gym memberships do not count towards this total as they are not financed or debt payments and could potentially be removed if needed.
Next, NSH Mortgage will calculate your future housing expenses. The principle, interest, mortgage insurance if needed, property taxes, homeowner’s insurance, and homeowner association dues will all be added towards the total of your new housing expenses.
You can determine your principle and interest payment with our NSH Mortgage Calculator for free in the below link to help determine “How much home can I afford?”.
Calculating Your Income
For most workers in the United States, your take-home paycheck is much less than what your current gross pay is. Fortunately for you, mortgage lenders will use your entire pay to calculate your income.
You can also add in monthly rental income, alimony payments, pension income, and disability income you receive to your monthly income. Calculating your income is a very important step when thinking about how much home can I afford?
The Final Result On How Much Home Can I Afford
When applying for a home loan, you should aim for a DTI less than 43 percent. That said, it is because most loans types will not accept a borrower who has a 44%< debt-to-income ratio.
The key is to get your DTI to an attractive number for mortgage lenders, but also for yourself to remain comfortable and assure yourself of continuous future payments.
Currently, there are low mortgage rates being offered, reducing the cost of home ownership. With these rates remaining low, it helps homebuyers receive approvals, even if their first application was not accepted a few months prior.
Contact Us to learn more at NSH Mortgage
How Much Home Can I Afford With NSH Mortgage Lender In Florida
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