These days, many people are wondering whether or not they can afford to own a home. Homeownership may be more in reach than you thought. One of the most important factors to review before you start looking to buy a home is how much financing you can get. By looking at your income, programs you can qualify for, certain lending calculations, and expenses—you should be able to come up with a close estimate. With rising costs, interest rates, and inflation, many people can feel overwhelmed by the process. However, it doesn’t have to be hard. This week, the team at Foundation Mortgage provides tips for understanding how large of a mortgage you can take on in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee.
Options for Financing Your Home
Before jumping into calculations, it’s important to first understand the types of loans you can get. For example, if you’re a Veteran, low-income, or a first-time home buyer—there may be several different options to lower your interest rates. You will also want to keep the seller in mind. Some programs, like VA Loans, have strict home inspection requirements. You can also decide between taking on a fixed-rate or adjustable-rate loan. An adjustable rate leaves you room to benefit from low interest rates, whereas a fixed-rate loan has more predictability.
In addition, you’ll decide between a conventional or a non-conventional loan. Conventional loans are not government-backed, but still subject you to similar requirements for proving you have the income and assets to afford a mortgage. Further, if you end up buying a large home, you may need a non-conforming loan—or one that exceeds allowable limits for Fannie Mae or Freddie Mac purchase.
Calculations to Help You Understand Mortgage Approvals
A key factor that every good lender will look at when they go to approve you for a loan is your debt-to-income ratio. This ratio measures the amount of income you have that can go towards paying debt. It may be higher if you have a lot of student loans, for example, but some programs view student debt differently. Talk to your lender or realtor, since many companies have free calculators to help you do the math. Others offer ways to calculate what percentage of income you’ll need to afford a mortgage. Once you do get an estimated loan amount, you’ll need to add the payment, times interest, plus any additional expenses like utilities, repairs, and insurance. This will help you grasp the full cost of homeownership. Another option is to use the Foundation Mortgage Mortgage Calculator.
Here at Foundation Mortgage, we can show you all the possibilities for mortgages programs that fit your unique needs. Contact our team serving the Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee area.