First Time Home Buyers: How Much House Can I Afford?
Once you have decided to purchase a home, the first step you need to do is to see how much of a mortgage loan you qualify for. To determine how much you can qualify for, you need to contact a mortgage lender. Whether it is a bank, credit union, mortgage broker, or mortgage banker, you need to choose who you will go to. If your credit scores are perfect and you have solid income and assets, you can go to any mortgage lender. If you have had prior bad credit and have lower scores, you may need to go to a specialty mortgage lender like myself who specialize in helping borrowers with not so perfect credit and who specialize in home loans with bad credit. If you decide to purchase a higher end home, you may need to seek a mortgage lender who specialize in Jumbo Mortgages. Depending on your financial status and situation, the key question is not how much can you get qualified for but how much house I can afford.
Mortgage Lender Will Give You Maximum Loan Limit You Qualify For
When you contact a mortgage loan originator, the mortgage loan originator will ask you to complete a 4 page mortgage loan application which is also known as the 1003. Once you complete the 1003, your mortgage loan officer will then run credit. If you are self employed, your loan officer will request to see your tax returns, two years tax returns with all schedules. Income qualification is the most important factor in determining how much you qualify for. Once your mortgage loan originator has a solid monthly gross income figure, he or she will look at your monthly liabilities such as minimum credit card payments, auto loans, student loans, installment loans, child support payments if any, alimony payments if any, and any other monthly obligations. After careful review and analysis of your mortgage application, credit, credit history, monthly obligations, and reviewing your automated approval per DU FINDINGS and/or LP FINDINGS, your mortgage loan officer will give you the maximum amount of mortgage you qualify for and the maximum price range of the homes you should be shopping for.
Pre-Approval Versus How Much House Can I Afford
When you get a pre-approval from your mortgage loan originator, the mortgage loan originator will give you a maximum amount of mortgage you qualify for and the maximum home you can purchase with property taxes, homeowners insurance, and other added expenses such as homeowners association dues and flood insurance. Your mortgage lender will not take into consideration on the key question you should always keep in mind: ” How much house can I afford”. Mortgage lenders do not take into account each family’s monthly expenses except those related to income, minimum monthly debt obligations that is being reported on your credit report. They do not consider personal expenses so just because under the mortgage lender’s eyes you may qualify for a mortgage loan, you may be taking on a larger financial burden where you may be buying too much house where you will struggle every month just to barely meet your minimum housing payment.
Things You Should Take Into Account On How Much House Can I Afford
When thinking about how much house can I afford, keep in mind that your mortgage lender does not consider utilities and maintenance cost associated with homeownership. Expenses that comes along with homeownership include water expenses and scavenger expenses. As a renter, water bills and garbage bills were taken care from the landlord. Now you will be responsible for. Mortgage lenders do not calculate utilities when figuring out expenses.
Another major factor you need to consider when thinking about how much house can I afford is maintenance. You will be responsible for general maintenance such as landscaping, snow plowing, and general repairs. Some repairs can be quite costly. For example, if you have a well and the well needs major repairs, you may be talking over $5,000 plus. Same with heating and air conditioning systems where a replacement of a furnace or central air conditioning system can run into the thousands.
Many homeowners have children who they send to private schools instead of public schools. Private school tuition can get quite costly especially if you have multiple children.
Other Expenses Besides Housing Expenses
Many homeowners also have other expenses such as graduate schools, medical expenses, hobbies, travel, and other expenses that the mortgage underwriter did not calculate in qualifying for a mortgage. It is the responsibility of the home buyer to make sure they do not buy too much house and consider other expenses they have besides just going by the mortgage amount the mortgage lender gave them. Remember that How Much House Can I Afford should be an extremely important factor when offering on a home and going through the mortgage loan application and mortgage approval process.