There are three factors to consider in determining how much you can afford:
1. Down PaymentMost loans require a down payment between 10 and 20 percent of the home price. If you are able to make a down payment of 25 percent or more, you may qualify for special mortgage programs offered by a variety of lenders.
2. Ability to Qualify for a MortgageMost lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, should not exceed 28 percent of your gross monthly income. They also expect your total installment debt (regular scheduled payments of 6 months or longer debt-car loans, credit card balances, etc.), including the proposed monthly mortgage payment on your new loan, not to exceed 36 percent of your gross monthly income. In addition to your gross monthly income, lenders review your employment history, stability, and potential for increasing your income. They also evaluate any additional income, such as bonuses, commissions and child support.
* Pride of OwnershipThere’s nothing like owning your own home. And don’t think you have to wait to buy. You’re never too young to own! Figures from the National Association of Realtors show that the average age of first-time buyers is 32 years. We can discuss the number and variety of financing options available. The waiting game is a losing game. Don’t put off buying a home thinking that prices will come down. They aren’t likely to. For instance, from 1984 to 1994, the median price of existing homes increased from $89,400 to $145,400-a total increase of 61 percent. They will request a credit report to verify your debt repayment, outstanding debt, and available credit. They will calculate your assets, including checking and savings account balances, CDs, stocks and bonds. Avoiding any late payments on credit accounts, and limiting your credit purchases, helps keep your credit report in good standing. If you have items on your credit report that could negatively influence your ability to secure a mortgage, be prepared to explain each situation in writing. You should also consider delaying major purchases until after you’ve moved into your new home.
3. Closing CostsClosing costs typically range between 2 and 5 percent of your loan amount. These fees are due in cash at the time of closing, or, in some cases, can be included in the loan.
Pre-qualification is always a good idea.Taking the time to pre-qualify for a mortgage before you begin your home search will put you in a much better negotiating position: your pre-qualification assures the seller that the transaction will not be delayed while you secure financing. You can determine how much your financial institution is likely to lend you by completing our Mortgage Calculator here. This is your first step towards loan pre-qualification. You may also fill out a preliminary Pre-qualification form to start the pre-qualification process. If you would like to learn more about financing options immediately, please contact me.