Owning a home can be a sign of independence and success. It allows you to build up equity and the mortgage interest and property taxes are tax-deductible. What can you do to make a home affordable for you?
Reputable lenders look at a list of criteria to decide how much they’ll loan you.
This List Includes:
- Credit score
- Employment History
- Existing assets
- Car leases or loans
- Credit card balances
- Debt consolidation loans
- Home equity loans
- Installment loans
- Student loans
- Other monthly debts
- Size/source of your down payment
If you’d like to get an idea of what you can afford before talking to a lender, here are a few tools you can use to decide whether a home is within your budget.
- As a rule of thumb, your house-hunting budget shouldn’t be more than 2.5 times your pre-tax annual income. If you earn $50,000 a year, your budget for house hunting should be around $125,000.
- Your Housing Expense Ratio, which is principal, interest, taxes, and insurance shouldn’t be more than 25% to 28% of your pre-tax monthly income.
- Your Debt-to-Income Ratio should be no more than 36% of your pre-tax monthly income. This is the ratio between how much you owe and how much you earn.
- Use an online calculator to figure out how much home you can afford.
“Qualifying for” and “can afford” are two different things. Mortgage Lenders will generally allow higher ratios than shown above; however, for most people pushing the limits of the debt-to-income ratio is not a sound financial decision. Shopping for a home within your budget will save you a lot of heartaches now and in the future.
If you’d like help determining how much mortgage please call us today.
Have questions? Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We currently lend in all of Washington, Oregon, Idaho, and Colorado. We offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have mortgage-related questions. Last Updated: