Purchasing a home is one of the most significant, yet expensive investments that a person can make. Determining the amount of mortgage you can afford is one of the first steps in the home buying process, and it depends on many factors. If you are interested in purchasing a home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and need assistance understanding how much mortgage you can afford, Foundation Mortgage can help. Our loan specialists can work closely with you to help determine the best financing option for you
Factors to Consider When Understanding Mortgage Costs
There are several factors to consider when attempting to determine the amount of mortgage you can afford. First of all, you will need to consider your monthly income, and figure in any investments outside of that amount, such as earnings from rentals, stocks, etc. You will also need to evaluate the amount of debt you must pay back each month, including credit card and student loan debts, car payments, etc. Next you will want to estimate how much you are able to pay for a down payment, and factor in the costs for interest rates, taxes, and homeowner’s insurance in addition to the amount you will pay for your monthly mortgage payment. It is recommended to have extra money reserved, usually the amount of at least three monthly payments, in case any unexpected costs arise.
Determining An Affordable Mortgage
When deciding how much mortgage you can afford, a general rule of thumb to follow is to not spend more than 28 percent of your monthly income on housing costs, and to not spend more than 36 percent on monthly debt. Debt-to-income ratio, (DTI), compares a borrower’s monthly income to their monthly debt. The higher a borrower’s DTI is, the more difficult it will be to be eligible for a mortgage, however, if you have a lower DTI, you will be likely to be eligible for a mortgage with more favorable rates and terms. Because of this, when planning to buy a home, you will want to pay off as much of your current debt as possible in order to qualify for the best mortgage terms.
Assistance with Understanding Mortgage Affordability
When purchasing a home, there are many factors to consider in determining how much mortgage you will be able to afford. If you are looking to purchase a home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and are looking for assistance with the mortgage process, Foundation Mortgage is here to help. We can work with you to determine your unique financing needs, and help you find out how much mortgage you can afford. Contact our office today for a consultation.