It’s easy to look at homes online and find one you love, but how much home can you truly afford? There are four things we look at: your monthly income, cash reserves, debts and expenses, and credit profile. Let’s start with the debt-to-income ratio because it’s one of the first things a lender will look at. As a general rule, your mortgage payment and housing expenses should total up to no more than 28% of your monthly income. If you make $5,000 a month before taxes, 28% of that is $1,400 a month. In a perfect world, that house payment, including taxes and insurance, should be no more than $1,400 a month.
“How much house you can afford is closely tied to the interest rate."
The next thing that lenders look at is your total debt. Maybe you have a car payment, a few student loans, and a credit card. All your debts should be no more than 36% of your monthly income. With that $5,000 a month example, you’d want your debts to equal less than around $2,000. Keep in mind that you want to be safe about these numbers. Some lenders will let you go up to 50% with these ratios, but my advice would be to stick with the 28% and 36% rules. Also, don’t forget that you have other costs when you own a house, like taxes, utilities, insurance, and the costs of repairs. Make sure you budget for all of that as well. How much house you can afford is closely tied to the interest rate, and the secret’s out: Interest rates are going up. If you are thinking of buying, I would do it sooner rather than later, and you need to speak with a lender beforehand. We work with the best lenders in the business. They’ll get you a good interest rate and make sure your ratios are in line with what's best for you. If you have any questions, feel free to call or email my team and me. We’d love to help you.
No comments :
Post a Comment