There are a number of factors that can contribute to the affordability of a house and, as a potential homebuyer, it’s important that you know what type of mortgage payments are within your budget. Debt-To-Income Ratio As a homebuyer, your first consideration will be the amount of your monthly mortgage payments. If you owe a lot of debt, lenders may consider you to be a high credit risk, which makes debt-to-income ratio a leading factor in determining how much of a house you can afford. Most lenders will discount any loans that you will have paid off within one year when determining how much of a home you can afford. As a general rule, your mortgage payment should not exceed 25-30 percent of your monthly take-home pay. Loan Term Although you will end up paying more interest in the long run, you will find that you can afford a more expensive house if you request a loan term of 25-30 years, compared to a shorter term of 15 years. Interest Rates When you look at an interest rate, all you see is a number. Hopefully, it’s a single digit that’s comparable with current market rates. Most homebuyers already know that […]
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