How Much Home Loan Can I Afford?
Have you ever asked yourself how much home loan can I afford? Knowing how much of a home loan payment you qualify for before you shop for a home will make your purchase go much smoother and can save you a lot of heartaches.
You don't want to find the perfect place to live then not know if you can qualify for a home loan. You need to know how much home loan you can afford long before you even start looking for your home.
There are a lot of factors involved when you qualify for a home loan.
Each lender has different home loan guidelines and there are a multitude of different types of mortgage loans.
Also jumbo mortgage loans will be harder to qualify for than a conforming mortgage loan. Several other factors like down payment, loan amount and what is considered a good credit score will make a difference.
There are some general home loan guidelines lenders use that will help answer your question, how much home loan can I afford? These are only estimates but you can get a general idea if you will qualify for a home loan and how much of a monthly payment you can qualify for.
1. Your mortgage payment, taxes and home owners insurance and any other fixed housing expense should be between 25% and 28% of your total gross (before taxes) monthly household income.
2. Your monthly housing costs (the total figure above) plus any other long term debt (monthly expenses extending longer than 11 months) such as car or boat loans, credit cards, or installment loans should not exceed more than 40% of your gross (before taxes) monthly household income.
These figures can go higher if you have a higher credit score because that means you are a better risk to a lender and will likely pass their home loan guidelines.
What is considered a good credit score to a lender usually starts at a score of 680 and above. It will vary between lenders but a 680 score and above means you will likely get the very best interest rates and terms on your home loan.
A lender will use the three major credit bureaus; Experian, Trans Union and Equifax to get an average credit score for you. It's a good idea to check your credit reports from all three major credit bureaus before you try to qualify for a home loan.
That way if you find any mistakes, you can clear them up before a lender sees your credit report. Once you get your credit report check carefully to see that everything is accurate.
If you find an error, dispute it immediately with the three major credit bureaus. It will take some time to get them to take the error off of your report. Having a clear credit report before you apply for a loan will make it a pleasant experience instead of a nightmare.
The best way to know if you will qualify for a home loan is talk with a mortgage professional. This is what they are trained to do and they can be much more accurate with figures so there are no surprises when you go to make an offer.
So when you are ready to qualify for a home loan now you will know exactly how much home loan you can afford.
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