HOW MUCH HOME CAN YOU AFFORD?How Much Home Can You Afford?

Before you take the plunge into homeownership, it is important to consider how much home can you

afford.

When deciding how much to lend you, lenders consider three primary factors.

These include:

How Do Lenders Determine How Much You Can Borrow?

Front-End Ratio

Back-End Ratio

Down Payment Percentage

Your front-end ratio is a monthly percentage based on your yearly gross income and the

anticipated monthly payment associated with your loan.

Front-End Ratio

Most lenders do not want this amount to be more than 28 percent of your gross

income

Some lenders will still approve a loan where this figure is as high as 40 percent

Your back-end ratio is the percentage of your gross income that is needed to cover

all of your debts.

Back-End Ratio

Including the anticipated mortgage loan debt as well as car loans, credit card payments,

other loans, etc.

Some lenders will go as high as 45 percent

Most lenders do not want this figure to be more than 36 percent

Your down payment percentage refers to the percent of the total cost of the home that you

are able to make as a down payment.

Down Payment Percentage

Many lenders will allow you to make a purchase with a significantly lower down payment

A down payment of at least 20 percent is preferred

Many lenders will allow you to make a purchase with a significantly lower down payment

Just because you can get a mortgage loan, it does not mean that you should get one.

Looking at Your Personal Situation

You need to consider your personal situation when deciding how much home can you

afford and whether now is the right time for you to buy

Qualifying for a loan does not mean you are truly prepared for the financial responsibility

of owning a home

Is this an ideal time to buy? Have you researched the local market stats? If you have a steady job, do not anticipate

moving away in the next five years, do not have any anticipated major expenses in the near future and if your

front-end and back-end ratios are below the top limit, you are probably in a great position to make a home purchase.

Source: http://sellingwarnerrobins.com/2014/02/how-much-home-can-you-afford/

www.sellingwarnerrobins.comAnita Clark©