A step towards a home you can call yours
You’ve decided it is time to take the next step in achieving independence. You need more space for the business you ran at home. Your family is growing.
These are a few of the reasons why you may need a new home, which leads you to wonder how much home you can afford. If you are wondering what your personal finances can afford you, the easiest and most convenient method to find out is to go online.
There are plenty of home affordability calculators available online which can give you a general idea of how much your personal finances can provide. You’ll be asked to input your annual income, monthly debts, down payment and a few more things, after which the computer will compute how much you can afford for how many months of payment terms.
The result of a home affordability calculator is not accurate but it will give you a general idea of the possible price range of the Charlotte NC home you want to own.
When you want accuracy, the best place to ask for assistance is your lender.
What do lenders check?
Here are a few factors that affect your mortgage loan.
Credit score. This is the most important factor which will determine whether you will be approved for a loan or not. It is based on credit history, which lenders will check and verify. Lenders prefer borrowers with low balances, a long history of on-time payments and a good mix of credit card usage. You will have a difficult time convincing lenders if you fall under the category of a high-risk borrower.
Income. Of course your income matters! The higher your income is, the bigger your mortgage loan can be. You will be required to provide documentation for your monthly salary and income tax returns. Lenders will be verifying information about your company, your work status, and everything about your financial situation that will ensure you can make a monthly payment.
Debt-to-income ratios. Many people think that when they have a stable job, a high annual income, a good credit score and on-time payers, they can get a mortgage loan but debt-to-income is also part of the equation. Mortgage lenders factor in your monthly debt obligations. It includes the possible percentage of your income which would be for housing expenses, along with your debt payments like credit card bills, car loans, student loans, child support and any other loans on your credit report. The ideal debt-to-income ratio is 36 percent or lower, although lenders allow higher ratios depending on your credit score.
Down payment. If you’ve saved up a good amount of cash for your down payment, then you will not have to borrow much and can still afford to pay for a higher-priced home.
Loan amount. The total amount you will take on as a loan is crucial. The lender’s perspective is that the larger the loan amount is, the riskier it gets because more money is involved and there is a larger possibility of loss.
Those are the top five factors that lenders consider when you take out a mortgage loan. There are many other things they look into, but these five are major decisions of the possible price or amount you can borrow.
Here are some great tips for you.
- A year before you plan to buy a Charlotte NC house for sale, get your credit score evaluated.
- Pay off as much as you can of your debts, and don’t renew or get new loans.
- Ask quotes from different lenders and know what you can do to get a lower rate. A reputable lender will take the time to explain your options.
So how much home can you afford? It would depend the result of the evaluation that lender will do. Get a headstart and do an online evaluation so you can have idea of how much you can possibly borrow.
Your home is your investment. Make it count by preparing well for it.
Call me, Nancy Braun, at (704) 997-3794. Let my skills and experience work for you.