How Much House Can You Afford - 2581 Words

How Much House Can I Afford? If you re thinking about buying a house, there are a few things to factor in before you fall in love with your dream home. Using a home affordability calculator can help you not only determine how much of a mortgage you can afford, but help you narrow down your search which is important when dealing with the hot Silicon Valley real estate market. Using the calculator below will help to determine your potential mortgage based on your monthly expenses, income, and other factors like your projected property taxes, home owner s insurance and other payments. This can give you an idea of what you can afford and what will fit your budget. (INSERT HOME AFFORDABILITY CALCULATOR HERE†¦) Determining how much house can†¦show more content†¦They assess this to determine how much additional debt you can take on, i.e., the front end. Ideally, it shouldn t be more than .28 or 28%. Determining your back-end ratio This is the total of all the payments from your debt-to-income ratio and your front-end-ratio. These are added and then divided by your monthly salary to determine how much total you will be able to afford. Ideally, it shouldn t be more than .36 or 36%. These totals aren t set in stone and each case may be different depending on the type of work you do and your specific circumstances. You may have higher debts and still get approved if you have a proven and consistent payment history. Factoring in your credit report Another area that lenders will look at is your credit report and your history to see how consistent you are with bill payments. This will help to determine your interest rate. Ideally, your credit report from the 3 bureaus should come out about 740, but if it s higher, that s even better. Your down payment An additional factor that s looked at is your down payment as a larger down payment will give you a smaller loan to pay off and smaller monthly payments. For some potential home owners, this is good news if they want to put down more than 10%, which is the average. Putting down 20% may help with the type of home you can afford. There are loan types that allow for 3-5% as a down payment. This is definitely something to look into if you know you