If you’ve decided that home ownership is right for you, the next step is deciding how much home you can afford. Typically, most lenders suggest that you spend no more than 28% of your monthly income on a mortgage.
When adding a home mortgage with current outstanding loans, the total for your debt service should not exceed 36% of your gross monthly income. In some cases, lenders may have slightly different requirements which could affect loan interest rates that may increase your purchasing power. Contact a lender for additional details. There are many lender options on our Local Resources list, if you do not have a particular person that you are already working with.
A preapproval letter is a tool that allows real estate agents to develop a list of properties that fall into a buyer’s price range. Agents want to steer buyers toward the homes that will fit into their budget. There is nothing worse than falling in love with a home, only to find out that the mortgage cost exceeds what you want to or can spend. Most sellers will require a lender preapproval letter with any offers that they entertain. That means that contacting a lender prior to looking at homes is prudent. A buyer with a preapproval will win over a seller quicker than one without.When you’ve figured out your price range, take a look at the market and the issues that matter to you. Research school districts, crime statistics, impending construction or anything that could decrease or increase the value of a home. Look at the surrounding area to see if it’s a place in which you see yourself and family.