December 2nd, 2018 6:10 AM by Jackie A. Graves, President
what is your number?
how much you can afford, these are the two important guidelines most lenders
The Housing Expense Ratio =
Ideally, your mortgage payment (principal, interest, taxes and mortgage
insurance) should be less than 28% of your monthly gross income.
The Debt-to-Income Ratio = In most instances, your
combined debt (credit cards, student loans, alimony, child support, car loans
and housing expenses) should be less than 45% of your monthly gross income.
to these key ratios, all the following will play a role:
Your income. You can get a very rough
estimate of your affordable home price range by multiplying your annual gross
income by 2.5 (this, of course, varies depending on current interest rates,
your debt and credit history).
Your credit. Generally speaking,
the better your credit, the lower the cost of obtaining credit and the greater
your financing options.
Current mortgage rates. Although mortgage
rates are rising, they're still low – making homeownership affordable for many.
Your downpayment. You don't need to
put 20% down, as commonly believed. In fact, the average down payment for
first–time homebuyers in 2017 was 5%, and 10% for repeat buyers, according to
the National Association of REALTORS®.
What's more, it's possible to put down as little as 3%.
The type of home. If you're looking to buy
a condominium, keep in mind that rates are typically higher for these loans and
you'll have to budget for the cost of your monthly condominium fee.
Fees and closing costs. Remember to factor in
the expenses and fees you will incur for a home appraisal, a home inspection,
and other professional services required to buy a home. However, in some cases,
the appraisal can be waived.
Visit our mortgage
calculators, including How Much
You Can Afford, and My Home by Freddie Mac® for
more information and resources about buying and owning a home. As always, reach
out to your lender to get the full picture of what you can afford.
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