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What Mortgage Rate Can You Afford?
What Mortgage Rate Can You Afford?
Getting approved for a mortgage loan is an exciting time in life! However, before you plan to spend the maximum amount offered, it's important to consider whether you can truly afford the mortgage your lender has offered. Although they let you borrow the maximum amount possible, doesn't mean you should. Taking time to calculate what mortgage rate you can afford will give you a clear view of your next move.
Calculate Your True Monthly Cost
If you are looking for an in-depth estimate of your potential mortgage payment, you will need a mortgage calculator that includes cost of homeowners insurance and property tax, which may vary depending on where you live. To get an accurate number, call insurance providers for a quote and research property taxes in the county you are interested in moving. Trulia offers a free, advanced mortgage calculator for homeowners to use to get an estimate.
Understand the Legal Limits on Lenders
Any individual lending money for a mortgage loan cannot underwrite the loan unless they confirm you are able to repay the amount offered. This determination is based on credit reports, job history, and your income. By law, lenders can't approve loans that take up more than 35% of your monthly income.
Limit Payments to No More Than 30% of Your Monthly Income
Using the 30% as a rule of thumb when figuring out your home buying budget is a common practice. Here is the formula: Multiply your pre-tax monthly income by 30 and then divide that by 100. The answer is 30% of your pre-tax monthly income. This shows you what the maximum amount you should spend monthly on a mortgage payment.
Choice Properties offers you a chance to find the home of your dreams. We work with your budget and ideas in mind to support your ultimate vision. Call us if you are ready to check out the available inventory or to speak with a reputable agent who can assist you with your home buying needs.