Determining your debt-to-income ratio is essential in getting a mortgage and being approved for lending.
Generally 43% debt-to-income (DTI) ratio standard is used by the Federal Housing Administration (FHA) as a guideline for approving mortgages. This number will help frame your purchasing power as a buyer. Before home shopping, you visit with a lender and then inform your real estate agent of a price point. This will allow a better home purchasing search when your agent is assessing the housing inventory to find specific options for consideration.
Getting the price point is especially helpful in looking at your whole financial situation. Getting approved for a mortgage up to a certain amount doesn’t mean you can afford the payments, be honest about your financial risk comfort level. While lenders provide buyers with a price range, it is essential to consult with your real estate professional about other financial and lifestyle considerations. They can help look at the broader picture to know whether you can afford a house.
Your Down Payment
- A down payment is typically around 10-20% of the home price, and when putting down more funds as a homeowner, you can reduce your monthly mortgage payment. All of these are factors to consider when selecting a price range.
Additional Purchasing Expenses
- Most homebuyers understand the down payment concept, but that is not the only upfront expense when purchasing a home. In addition to the down payment, budget funds for the costs associated with the loan, which generally run about 3% depending upon your lender and closing costs. As the name implies, plan to pay closing costs when you close the transaction, also known as settlement.
Be prepared to purchase your home by consulting a lender and then inform your agent of the findings. With your real estate desires and our expertise, you can determine the next steps and make the home purchasing process a fun and exciting experience.
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