When buying a home your lenders looks at your income, assets and down payment. They’ll also want to know about your liabilities and other financial obligations. This includes things like credit card debt, auto loans, child support, taxes and insurance – all of which impact the size of the loan you can afford.
All lenders look at your debt-to-income ratio. It’s a way for the lender to judge whether you’ll be able to manage the monthly payments. Acceptable debt-to-income ratios vary by lender – and loan program – so be sure to ask your lender what ratio they use. Once you know the ratio you’ll be able to calculate the maximum monthly payment you could afford for your home’s mortgage, insurance and taxes.
Online mortgage calculators can help you determine what price home you can afford based on that information and current interest rates. If rates go down your buying power increases. If rates go up your buying power will go down.
Ask your lender what information they need to determine the payment you would qualify for. And always ask about all loan programs that may be available to you.
