Establish a Mortgage You Can Live With

Establishing a Mortgage You Can Live With

All lenders have a few simple formulas that calculate how much of a mortgage you can afford. Qualifying ratios is the name of these formulas because they measure the amount of money that should be spent on your motgage in relation to your income and other expenses. Keep in mind each lender has their own version of these qualifying ratios and their calculation numbers are a bit different from one another.

In order to qualify for loans, your housing expenses should not exceed over 28% of your monthly income. Your monthly housing expenses include Mortgage principal, interest, taxes, and insurance. Say $30,000 is your gross annual income, then your monthly income is $2,500. Now, 28% of $2,500 is $700. You would most likely qualify for this loan because $700 is what you would pay monthly, and the lender would see you would have plenty of extra money.

It is extra important that you select a home that will keep you & your family happy for years into the future.

When figuring out your budget when buying a home, you absolutly need to allow room for extra expenses like maintenance and utilities. If you plan on buying an existing home, collect utility cost averages and maintenance costs from the previous owners to aid yourself in preparing for home ownership

If your finances are in great condition, you could look for a home priced two or three times your yearly salary. The mortgage calculators can give you a rough estimate of how large of a mortgage you might qualify for, speaking with a lender or mortgage broker will definately give you a more accurate figure.

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