How Much Home Can you Afford?

Dated: 10/07/2019

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Buying vs. Renting Your Home
How Much Home?
The single most important part of buying a house is figuring out how much you can realistically afford to pay.

There are a few basic formulas commonly used by lenders to determine how much of a mortgage you can reasonably afford. These formulas are called qualifying ratios because they estimate the amount of money you should spend on mortgage payments in relation to your income and other expenses. It is important to remember that these ratios may vary from lender to lender and each application is handled on an individual basis, so the guidelines are just that - guidelines.

Generally speaking, to qualify for conventional loans, housing expenses should not exceed 26 to 28 percent of your gross monthly income. Monthly housing costs include the mortgage principal, interest, taxes and insurance. For example, if your annual income is $30,000, your gross monthly income is $2,500, and $2,500 x 28 percent = $700. So you would probably qualify for a conventional home loan that requires monthly payments of $700.

It is important that you select a home that will meet your family's needs and keep you happy for years to come.

 

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Stephanie Ward

I, Stephanie am a proud Colorado native that strives to educate my clients with in-depth home and area knowledge. I was Born in Denver in 1976 and continue to live and love our beautiful “Rocky Mou....

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