CAN YOU AFFORD THIS HOUSE? |
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THE N-SOUCER 7005 Shannon Willow Road, Suite 100 704-535-4243 XT 7729 CAN YOU AFFORD THIS HOUSE? How much you can afford is one of the most important rules of home buying. Your budget can affect everything from neighborhoods where you shop, to the size of the house, most importantly what type of financing you choose. Your lender will determine your purchasing power. Your lender will look at more than just your income to determine the size of the home loan. Your lender will prequalify you for a home loan. There is a difference between buyer that is prequalified or preapproved. Prequalification of the buyer’s ability is a preliminary snapshot of the buyer’s purchasing power due to limited information provided by the buyer, preapproval is a more formal process where a lender examines your finances and agrees in advance to loan you money up to a specified amount, along as all of your provided information can be verified. Real estate agents prefer the buyer to be preapproved vs. prequalified. The quickest way to bring frustration to the home buying process is to start shopping for your dream home with out the approval of your lender. These are important qualifying factors your lenders will consider to determine your purchasing power. These include: your gross monthly income, your credit history, the amount of your outstanding debts, your savings or the amount of money you have available for a down payment and closing costs, your choice of mortgage, and current interest rates. There are two very important ratio lenders consider when pre-approving you for your home loan: the debt-to-income ratio and the housing expense ratio. The debt-to-income ratio is used to determine the amount of debt you are paying on each month such as car payments, student loans, credit card, etc,) this ratio shouldn’t exceed more than 36 percent of your gross monthly income. FHA and VA loans are more lenient with the percentage. Typically these type loans shouldn’t exceed more than 41%. Remember there are factors that will allow the percentage to exceed the qualifying amount. The housing expense ratio will generally be 28-33 percent of your gross monthly income. The housing number will determine your mortgage payment. These are some factors that could convince the lender to be more lenient with their qualifying ratio guidelines, which are larger down payments, the buyer shows the ability to saved, which can include 401k, IRA, ect, the length of time on his/her job, and the use of credit. Your lender will love a buyer who shows stability. God Bless and Happy House Hunting! The N-Sourcer |