How much can I afford

How much can I afford - How much house can I afford is a very popular question among homebuyers. The main factor to determine this is your debt to income ratio, or DTI. Different lenders have different requirements and guidelines for what the maximum debt ratio they will allow. Most non-conforming, or subprime, lenders have maximum debt to income ratio limits around 50-55%. Some lenders have lower limits and some lenders have higher limits and through the use of some automated underwriting engines you may even be able to get approved with a DTI of 65%. How high your LTV is, the amount of money your borrowing compared to the purchase price or value of the home, can also affect DTI guidelines. The less money you put down usually the lower DTI that is allowed.

Getting approved beforehand is of the utmost importance so that you can find out how much home you can afford. There are many different variables that will affect how much home you can afford such as how much the property taxes are of the property that you find, whether the house you purchase has an association with and association fee, and how much you end up needing to pay for homeowners insurance. All of these charges will affect your debt to income ratios.

Remember only you know what you are comfortable spending. Do not allow yourself to be talked into spending more then that limit by family members, friends or a real estate agent.

Depending on which loan program you choose will change the amount you will be approved for. Loans that have interest only periods will reduce your monthly payment, therefore allowing you the option of purchasing a more expensive home.

There are other loan programs that do not calculate ratios, called "no ratio" loans. These are very popular for those that may not be able to document all their income. Stated and no ratio loans are very popular programs. Some people although on paper can't afford x amount, in reality they can truly afford it.

Remember that when deciding how much you can afford, you are the only one who truly knows that. The mortgage professional can help you out, and even place a number on it, but you must be comfortable with the payments. Also, keep in mind that there are several other monthly payments that you will be making that are not included in your debt ratio (in most instances), such as your cell phone bill, cable, and groceries to name a few.

What Information is Needed for a Mortgage? - Different lenders have different mortgage application requirements.
The following information is generally required:

Social Security Number
Employment History (for 2 years)
Paystubs and W-2
Checking, Savings Accounts and CDs
Retirement Plan
Liabilities (creditors names, monthly payments, and balances)

If you have had prior bankruptcies, the lender will require all of your bankruptcy paperwork.

The main thing your broker will need this: What is your reason for getting a mortgage? Once you have answered that question the rest is pretty easy. You will need different documentation if you need a mortgage for a construction loan vs a refinance.

At settlement, you will be required to present a photo identification. To avoid complications at closing, it is a good idea to give to your mortgage broker a copy of the identification at application to ensure that the loan docs have the correct spelling of your name.

If you are paying off credit cards or other consumer debts through the proceeds of your mortgage loan you will need to provide escrow or the settlement agent recent copies of the statements from these accounts. This is so the correct amount will be payed and mailed to the correct address.

If you have had a divorce, the lender will most likely require your divorce decree.

Whatever nformation you submit you want to be sure that it is truthful. If you submit false information your loan could be denied in underwriting or worse you could be charged with fraud!

If you are going through a divorce be sure to tell your mortgage professional. They will need the full divorce decree from you.

It is better to provide the broker with more information and have it be not needed. If you undersupply the broker with whats been requested then your holding up your own loan.

If you have had past credit problems, some lenders will require letters of explanation of the credit problems.

The amount of paperwork required mays seem overwhelming. Your loan officer or the processor will let you know exactly what they need. After you give them those documents, they may ask for more. It is very important to provide everything as quickly as possible. Often your application does not get submitted to underwriting until everything is received from you.

You will need to document assets if you list them on your application. Generally you will need your last 2 months statements to document the assets. Documenting assets can be the difference to qualifying for the loan desired or qualifying for a little bit better interest rate.

How much will my mortgage payment be? - What you can afford depends on your income, credit rating, current monthly expenses, downpayment and the interest rate. There calculators that can help, but it is best for you to go to a broker or a lender to find out for sure.

Figuring out the amount of the monthly payment for a particular loan size is relative easy. There are online mortgage calculators at most mortgage websites that can perform such functions. Figuring out whether one can afford such a payment is quite another story. It is highly recommended that homebuyers speak with a mortgage professional rather depending on mortgage calculators. Online mortgage calculators do not take into account the home owners' other financial obligations and goals. Nor do they give accurate interest rate quotes. These calculators require its users to input the interest rates into the formula. If the homeowners key in an unrealistic interest rate, the results can be way off. On the other hand, a mortgage broker can quote an accurate rate quote base on the homebuyer's actual financial background. Moreover, a mortgage broker can also advise on a homebuyer's affordability after evaluating the entire financial picture.

Dont forget to not just consider your mortgage payment but to take into account all costs of homeownership. There will be charges for water and garbage collection as well.

Lenders prefer to see your mortgage payment including taxes and insurance around 38%. If you make $50,000 a year, you're mortgage payments would be around $1583.

You should also take into conceration, you have to pay taxes on your property and carry homeowners insurance. This can be added to your mortgage payments...otherwise known as an escrow.

Most online mortgage calculators are not set-up to take into consideration other mortgage options such as interest only, or loans like pay option arms. Interest Only loans have a relatively simple calculation, however a pay option arm has four payment options, which require four different calculations. If you are considering one of these other options it is best to speak with a mortgage professional. Using these alternatives can significantly increase the loan amount you can afford compared to a traditional fixed rate mortgage with the same payment.

You must also take into consideration any homeowners association fees and/or mortgage insurance fees to figure out how much your mortgage payment will be, if they are applicable. Mortgage rates vary significatnly from program to program and from different documentation type to different documentation type. Rates are also influenced by credit significantly so while online calculators can give you an idea as to what your payment may be it is best to apply online or talk with a mortgage professional to get an accurate quote.

If you feel that you can afford a higher monthly payment than what is being offered to you you may qualify for a no ratio or no doc loan that will allow you to purchase the home of your dreams.

Buy Your First Home - Are you interested in buying your first home in North Olmsted or elsewhere in Ohio? Its easier tham you might think!
Did you know that in 2005, 43% of all first time home buyers used mortgage programs with no down payment?
A good mortgage professional can help find a loan program to make your dream a reality.

One thing to consider when purchasing your first home is all the extra expenses. The hidden cost of homeownership. When renting you often don't have to pay for garbage collection, water etc. These are just some of the hidden costs involved.

You may want to consider Down Payment assistant program to help with down payment or closing costs when purchasing your first home. In addition to this you may ask for seller contribution of 3 - 6% for additional help. Your real estate agent can help you structure the contract.

With the many programs that are available to you as a first time home buyer, you should have no problems finding the right program for your buying needs. Your mortgage professional will be able to go over different options and inform you how to get your home purchase done with no down payment and zero out of pocket expenses.

The payment on your new home has tax advantages. Your payment could be slightly higher tha your current rent payment, but, because of tax advantages, you could actually be saving a couple of hundred dollars a month.

Many first time home buyers that do have the additional savings for a down payment and closing cost choose to use 100% financing options and seller contributions so they can save those funds for things like new furniture, remodeling or painting, land scaping, etc. Don't forget that once you own the home you will want to make it your own with some personal touches.

Many first time homebuyers purchase a home with a first and second mortgage. By doing this you can avoid mortgage insurance and you can purchase a home with no down payment. Your first mortgage will be 80% of the purchase price and the second mortgage will be 20% of the purchase price. The second mortgage will either be done as a home equity line of credit, a HELOC, or a second mortgage.