How much can you afford?How much can you afford?

How much can you afford, you decide, but your lender will determine how much you qualify for.

Lenders are careful, but they make qualification decisions based on averages and formulas. They won’t understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for all the new opportunities your home will give you like furnishings, landscaping and repairs.

Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow.  An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income. Total debt load, including car payments, student loans, and credit card payments, can’t be more than 36 percent.  As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market though, we urge you to think carefully before stretching your budget quite so much.

Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.

Don’t Wait to Get Pre-Qualified for a Loan!


When making an offer on a home you want to have the upper hand in negotiating. Ensuring that you have been pre-qualified for maximum buying power will allow you to be confident in your ability to make an offer on your dream home.  It will also show the seller that you are prepared and they do not need to worry about your ability to afford the home.

 

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