How Much House Can You Afford?

The first step in finding out your purchasing power is to get PreApproved for a Mortgage unless paying cash. When looking to obtain a mortgage you will talk with a lender to learn about the different loan types you qualify for and find the one that works best for you. In order to determine if you would qualify for a loan the lenders will collect and look at the following information and assess the risk of lending you money.

Items Lenders look at for PreApproval:

1. Proof of Income

2. Proof of Assets

3. Good Credit

4. Employment Verification

5. Other Documentation Needed

Credit Score

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After you have gone through the  PreApproval process you can now get into the details of loan type and monthly payment to fine-tune your budget and purchasing power. A mortgage calculator tool can help you figure out some important figures, how interest rates impact your purchasing power, and how property taxes are factored into overall costs. Enter the Home Value, how much you want to borrow, interest rate, loan terms, and taxes for the property to get an estimated look at your monthly payments for different scenarios.

Free Mortgage Calculators

Pro Tip: Rember you decide what you want to spend so even if you are approved for more money know yourself!

Lenders are careful and they make qualification decisions based on required guidelines, averages, and formulas. They won't always 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, to repairs.

Historically, banks use a debt-to-income ratio for how much borrowers could borrow. An approved housing payment looks at the buyer's gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments. As home prices have risen, some lenders have responded by stretching these ratios to higher. No matter how expensive your market though, we urge you to think carefully before stretching your budget to high.

Deciding how much you can afford should involve careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.