How Large a Loan can I be
Approved for?
Lenders use a formula called a debt-to-income ratio to determine
the loan amount for which you may qualify. This ensures that your
total monthly debt doesn't take up too much of your income, and
you remain inside your financial comfort zone after you buy a home.
Typically, a debt-to-income ratio compares your anticipated monthly
housing payment to your gross (pretaxed) monthly earnings and your
monthly debt (your credit card and any other loan payments, plus
your mortgage payment).
For example, it used to be that most loan programs required a 28/36
debt-to- income ratio, which meant you could devote up to 28% of
your gross monthly income to housing expenses, while your monthly
housing expenses plus your monthly debt combined could be as high
as 36%.
Many of today's loan programs offer expanded guidelines that allow
you to devote more of your gross monthly income to your combined
monthly debt. And with the increased use of credit scoring and automated
underwriting, many home loan applicants benefit from more flexible
debt-to-income guidelines that allow them to be approved for higher
loan amounts.
Our Mortgage
specialist can help you get a better idea of the maximum
mortgage amount you can afford. Once you have this maximum
figure, it's up to you to decide if this is the right amount
for you, or if you would feel more comfortable with a smaller
mortgage and a lower monthly payment.
See tips on shopping for a mortgage! |
< How to
< Can I afford it?
< Credit History
< Down Payments
< Closing Costs
< How big a loan?
< Mortgage Payments
< Financing Choices
< Government Loans
< Conventional Loans
< Loan Shopping Tips
|
