Many people find themselves in financial trouble by spending more for a home than they can afford. So, it helps to analyze your finances and set a mortgage budget to determine how much you can spend on a monthly mortgage payment.
If you are thinking about taking on a higher monthly mortgage payment than you are currently paying, we suggest you save the difference between what you are currently paying and what you expect to pay going forward. This will help you determine if you’re comfortable with the higher monthly mortgage payment, and help build up additional savings for closing costs and your down payment.
Income and Monthly Expenses
Your income is important, for obvious reasons, in setting your mortgage budget. And lenders use your income as an indicator of your ability to pay a mortgage. Your total income may include alimony, investment revenue, or other sources in addition to regular wages.
Lenders compare your income to your monthly expenses to get a debt-to-inc0me ratio, which reflects how much you can afford to pay for a monthly mortgage.
For information about calculating your debt-to-income ratio, watch our video: What is your debt-to-income ratio? Questions we ask borrowers.
Pre-Qualify for a Mortgage
The easiest way to get an idea of how much you can afford to spend on a monthly mortgage is pre-qualify for a home loan.
It takes just a few minutes to review your finances (income and expenses), and it can even be done over the phone. After being pre-qualified for a mortgage, you will know how much you can afford to spend on a monthly mortgage payment based on a set of criteria used by lenders.
Learn more about mortgage pre-qualification with these articles.
When you are ready to look for a home or refinance an existing mortgage, the first thing you want to do is pre-qualify.
Contact us when you are ready to pre-qualify for a home mortgage, and you will know very quickly how much you can afford for a monthly mortgage payment.