How Much Home Can I Afford?
Determining how much you can afford is an important first step in shopping. How much will your monthly payments be? Take into consideration future changes in your household income. Are you anticipating a promotion at work that would increase your salary? Will you be adjusting from a double income family to a single income family in the coming years? If the interest rate is adjustable – can you afford the larger payment if the rates increase?
Your debt-to-income ratio is the amount of debt payments per month divided by the amount of your income per month. This ratio helps lenders decide how large of a mortgage loan you can comfortably handle. Most lenders calculate your debt-to-income ratio to help determine whether you can afford the loan.
Before you start shopping for a loan, you’ve got to figure out how much you can afford to pay each month. You can do this yourself before meeting with a lender by calculating your costs and determining your financial worth. Mortgage calculators are available online and can be a tool to helping you determine how much you can afford.
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