How big of a home loan can I get in Washington State? What’s the maximum mortgage amount I can borrow with my income?
These are two of the most common questions among home buyers in Washington, particularly with first-time buyers. Here’s what you need to know.
At a glance: How much of a mortgage loan you can qualify for will largely depend on your debt-to-income ratio. This is a comparison between the amount of money you earn, and the amount you spend on your recurring debts. Generally speaking, lenders prefer borrowers to have a debt ratio no higher than 50%. Below 43% is even better.
How Much of a Mortgage Can I Get in Washington?
Banks and mortgage companies use a variety of methods to determine how much a person is able to borrow. Your income and debt situation is one of the primary considerations that affect borrowing capacity.
In particular, lenders want to know how much monthly recurring debt you have relative to your monthly income. This is aptly referred to as the debt-to-income ratio, or DTI, and it will partly determine how big of a home loan you can get when buying a house in Washington State.
There isn’t a single, industry-wide cutoff point for DTI ratios. It can vary from one mortgage company to the next, and also from one loan program to the next. With that being said, having a manageable level of debt will improve your chances of qualifying for a mortgage loan in Washington. These days, most lenders prefer to see a back-end DTI ratio no higher than around 43%.
This is a commonly used threshold, but it’s not written in stone.
Exceptions are often made for well-qualified borrowers with good credit, sizeable down payments, and/or cash reserves in the bank. Additionally, if the new home loan will only result in a minor increase in the borrower’s monthly housing costs, a higher debt-to-income might be allowable.
The most important thing, from a mortgage underwriting perspective, is that you have sufficient income to manage your monthly house payments, along with all other recurring debts (like credit cards, auto loan, etc.). That’s what matters most. The DTI is just one way to determine this.
Pre-Approval Is the Logical First Step
Getting pre-approved for a mortgage is the best way to find out how big of a home loan you can get. And it makes sense to do this before you start shopping for a house. Otherwise, you could end up wasting valuable time and energy by looking at homes that are above your price range.
We encourage all home buyers in Washington State to get pre-approved for a loan before entering the real estate market. It helps you determine how much of a mortgage you can take on, based on your current financial situation. It will also make sellers more inclined to accept your offer, when the time comes to submit one.
Let’s talk: Please contact Sammamish Mortgage if you’d like to find out how much of a home loan you’re qualified for, based on your income and other factors. We look forward to helping you!