If you are buying a home, one of the first things you will ask your lender is about how much money you qualify to borrow. But when it comes to mortgage financing, there can be a sea of difference between what you CAN borrow and what you SHOULD borrow. It is important to understand what will be a comfortable and manageable mortgage payment for you, in the long-term.
If only the financial math is being taken into consideration, lenders calculate the Debt-to-Income Ratio & will allow for 28 percent to 31 percent gross income to be used as payment for the new house. Upto 43% of your gross-income will be used for the combination of all consumer-related debts. Keep in mind that these are only the average ratios & guidelines that most lenders set for all the common mortgage loan programs.
Things to Account For
Every person’s financial situation is bound to be different but it is important that you factor in all the variables and take your overall budget into consideration when you are trying to understand how much of a mortgage amount you qualify for. The things you will have to take into account in your monthly budget are:
Short-term expenses such as travel, medical, auto repairs, emergencies etc
Additional home expenses like maintenance, water, electric etc
Maintain a buffer for savings & financial planning
A Broader View
And so mortgage loan planning is a lot about taking a 360° view of your finances, your regular living expenses, contingencies and savings. The actual amount you can afford depends on numerous factors such as your annual income, the target monthly payment as well as the down payment amount. Speak with an experienced mortgage professional and understand how the process and calculation works.
Get Expert Advice
The person will be able to help you with evaluating the percentage of the total monthly income which goes towards all your debts & will help you identify the additional amount that you will have to divert towards your mortgage payment. The thing to remember is that the income you are left with post debt & taxes should be sufficient to cover all your living expenses & savings goals. For guidance on how to budget all these things and plan your mortgage loan to suit your circumstances, contact the experts at ResMac Home Loans.