How Much House Can You Afford To Buy?
Wonder No More
We all think we know how much house we can afford. Maybe we know how much rent is comfortable or we think we should be able to afford the same property our brother purchased.
Whatever the number in our head, it's not necessarily the same number that a mortgage lender thinks we can afford.
Mortgage lenders operate in a highly regulated industry. They have guidelines that they have to lend within, especially if they plan on selling their loans into the secondary market. And believe me, they usually want to sell our loans so they can keep making more loans.
Some of these guidelines include debt to income ceilings and loan to value limitations, which are fancy ways of saying a borrower can only have a certain amount of debt and a borrower's loan must be against less than (generally) 80% of the appraised value of the collateral.
The best way to determine how much house you can buy is to get yourself pre-approved by a reputable lender.
Ready for pre-approval? I have several lenders in my rolodex that I can recommend. Drop me a note and I'll put you in touch.
Not ready to dive into pre-approval, but really want to start assembling your wishlist? Use the chart below for a good estimate of what price range you can dream in (click to enlarge). This chart assumes 20% down on a 30 year loan. Find your monthly gross income on the left and the prevailing interest rate across the top of the chart.
Got questions? Ping me. Ready to start shopping or dreaming? Check out the links below.