How Much Mortgage Can I Afford

How Much Mortgage Can I Afford



How Much Mortgage Can I​ Afford?
Shopping for a​ home can be an​ exciting time in​ one’s life .​
There are so many things to​ consider; how many rooms,​ how many bathrooms,​ the​ neighborhood and the​ school district .​
However,​ perhaps the​ most important consideration is​ how much house one can afford .​
The general rule of​ thumb is​ that most homeowners can afford a​ mortgage loan that is​ 2-2.5 times their gross income .​
This means a​ family with a​ household income of​ $100,​000 could probably afford a​ $200,​000-$250,​000 home .​
Of course this is​ generalization .​
There are other factors to​ take into consideration.
When lenders are considering potential buyers they look at​ more than just their gross income .​
They also look very closely at​ the​ buyer’s front-end and back-end ratios,​ as​ well as​ the​ amount of​ the​ down payment they can afford .​
We will take a​ closer look at​ what these factors are and why they are important.
1 .​
Front-end ratio: the​ front-end ratio is​ the​ percentage of​ ones’ gross income that will go towards the​ monthly mortgage payment .​
The mortgage consists of​ principle,​ interest,​ taxes and insurance .​
Most lenders don’t want to​ see the​ front-end ratio higher than 28% .​
This means that the​ mortgage payment should not exceed 28% of​ ones’ monthly income.
2 .​
Back-end ratio: the​ back-end ratio is​ the​ percentage of​ ones’ gross income that is​ required to​ cover debts .​
This includes the​ mortgage,​ credit card payments,​ child support and the​ like .​
Most mortgage companies would like to​ see this ratio stay below 36% of​ ones’ gross income.
3 .​
Down payment: Lenders would like to​ see a​ down payment of​ at​ least 20% .​
a​ down payment of​ this amount will allow the​ buyer to​ skip out on​ paying expensive mortgage insurance.
Purchasing a​ home can be a​ very satisfying experience .​
It is​ a​ life-long dream for many and a​ great accomplishment .​
However,​ it​ can also be expensive,​ so ones’ total financial situation must be taken into consideration .​
One must not only consider ones income,​ but also expenses,​ debt,​ lifestyle and personality .​
Only after these things are carefully and completely considered is​ one ready to​ purchase a​ home.




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