Financial Guidance - Charisma Realty Corp

How Much Can I Afford

When You Are First Thinking Of Purchasing A Home, The First Question You Ask Of Yourself Is:

“How Much House Can I Afford?”

There are many calculators out there, which will give you an idea of what you can afford, but your lender decides what you can borrow, and you decide what you can afford.
Lenders are careful, but they make qualification decisions based on averages and formulas. They won’t understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected – for all the new opportunities your home will give you to spend money, from furnishings to landscaping and repairs.
Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent. As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market may e, we urge you to think carefully before stretching your budget so much.
A general calculation would be total monthly debt (including new mortgage loan payment) / monthly income = %. This debt to income ratio is a key factor in calculating your home payment and ability to pay your monthly payment.
Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your peace of mind and security will matter the most.
Remember, if you’re buying a house with someone else such as a parent, spouse, companion, then that person’s annual gross income and debt can be considered in computing the cost of the home.

At the end of the day, it is a combination of factors that answer the question, “How much house can I afford?”

We can help you interview lenders to make sure you are getting the best deal. There are thousands of lenders out there. We know the tricks they can play. An experienced agent can help you pick the right lender. We have several tricks that our clients have loved.