How Much of a Home Loan Do You Qualify For?
Taylor Shults Philley Real Estate Broker/Owner Austin, TX (512) 667-4738 Contact Profile
How much of a home loan will I qualify for?
Find yourself wondering this question? There is a (somewhat) simple answer to this.
When qualify for a home loan, mortgage lenders take into consideration your ability to repay the mortgage. They take into consideration factors such as your credit history, your gross monthly income, and how much you can put towards the down payment.
To figure out how much of a home loan you will qualify for, you need to understand the term Debt-to-Income Ratio. This is basically how much debt you owe (reoccurring monthly payments such as credit card payments, car payments, etc) in ratio to how much money you make every month. (For a more detailed account, read full article on how much you can afford at Bankrate.com )
Most banks will loan with up to
a 40% debt to income ratio (some even up to 50 or 60%!). So, if a potential home buyer makes $30,000/year (or roughly $2,500 per month), then they are allowed up to $1,000 per month of debt. This figure must contain ALL of their debt; their car payment, student loans, credit cards, child support, and any other monthly reoccurring payment in addition to their mortgage can equal $1,000.
(If you are purchasing with a spouse, boyfriend, girlfriend, or friend, then BOTH of your incomes can be added together to allot for a higher allowed debt amount. Also, do NOT count your current RENT into your debt, that is not a debt factor as it will not continue after you purchase your home)
So after subtracting all your other required monthly payments, how much money do you have left over every month for a mortgage?
By Taylor Shults Philley Real Estate Broker/Owner with Austin Realty Firm
Posted on January 18, 2010 10:49 AMSource: activerain.trulia.com