Home Affordability
What's the limit when shopping for a home?
How much "house" can you buy?
All too often, buyer start home shopping based on their needs: how many bedrooms, pool, location near school or work, etc. However, price tends to be secondary.
Today, homes are increasing in price as an exponential rate. It is wise to ask yourself, “How much can I afford?” Even if it’s not your first time around the block, you still need to know how much you can afford if you are refinancing or buying new property. The short answer: It depends. Let’s look at the different ways to calculate home affordability.
The secret behind determining affordability.
There are several factors in determining affordability. These factors include:
- Income
- Length of time on the job
- Credit history and score
- Current and outstanding debts
- Location (upper limits for government-backed loans)
Old Town Lending is known for being one of the most helpful resources for all buyers, regardless if this is your first home purchase or fifth. We can help you understand home affordability and how to possibly leverage yourself to maximize your borrowing potential.
Debt-to-Income Calculator IMPUTS
Debt-to-Income Calculator OUTPUTS
Lender Standards for Debt-to-Income Ratios (DTI)
Lenders want to know how well you're making ends meet and how much home you can actually afford. The lower your DTI, the less debt you owe and the more able you are to make monthly loan payments.
Lenders consider both your front-end ratio, which is the percentage of mortgage you pay relative to your income, and your back-end ratio, which measures your total debts, including mortgage expenses, against your income. It can be helpful to know how your spending and savings can impact your future homeowning goals, too.