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| 1) How much house can I afford?
2) Why do I need to check my credit prior to purchasing a house? 3) How much do I need for a down payment? 4) How is pre-qualification different from pre-approval? 5) What is the difference between conforming and nonconforming loans? 6) Should I choose fixed or adjustable-interest rate mortgage? 7) What are points? 8) What is APR (Annual Percentage Rate)? 9) What are closing costs? 10) What is PMI (Private Mortgage Insurance)? 1. How much house can I afford? TOP The amount of loan for which you may qualify is based on two different calculations. Using what are known as qualification ratios, lenders evaluate your income and long-term debts. A fairly standard ratio is 28/36. Certain mortgage plans sometimes use more liberal ratios, contact us for more details. Here is how it works: With a 28/36 ratio, you are allowed to spend up to 28% of your gross monthly income for mortgage payments. The lender will then run a different calculation. This one is your loan payment and debt payments combined, which may not exceed 33% of your gross monthly income. To calculate how much you may be able borrow, you also need an estimate of current interest rates. For example: Suppose you had $1,000 a month for mortgage payment; at 7% that would let you borrow about $160,000 on a 30-year loan. At 6% the loan amount would be nearly $175,000. If your rate were 8%, the loan amount would be a bit less than $150,000. As part of this calculation, you also need to estimate and include the property taxes, homeowners insurance, and homeowner association fees (if applicable) you might need to pay, which are considered part of your monthly expense. |
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| srvc |
Equal Housing Lender
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