How Much House Can You Afford?

Looking for a house is an exciting time! Assessing what you like and don't like in available houses, comparing options, and trying to find the perfect home for your family. BUT, how much can you actually afford AND qualify for?

My recommendation, when beginning the house search process, is to talk to your lender first! In fact, there may be sellers who are unwilling to accept an offer from a buyer who is not preapproved, and may even want you to provide a copy of your preapproval letter. There can be many factors that are considered in being approved for a loan, and even more so if you are participating in a loan program offered through a government agency. Talking to your lender on the front end can help you assess what price range you actually need to be looking for a house. AND, despite what you see on TV, it may be hard for the average butterfly breeder and part-time, stay-at-home bassoon instructor to obtain a loan for the big, perfect house they desire.

There is a lot of analysis underwriters go through in assessing your qualifications for a loan. Consideration may be given to things such as the following:

  • Debt-to-income ratio
  • Outstanding credit obligations
  • Credit report/score
  • Associated property taxes, insurance, homeowner's association fees
  • Down payment
  • Residual income
  • Job stability
  • Dependents

And these may be just a few considerations! You also may need to provide various documentation before you are approved. Examples could include: your most recent pay stub, W-2's for previous years, monthly bank statements, or proof of dependency (marriage/birth certificate).

Lenders and underwriters are not there to turn you away; however, their job is to qualify you for a loan that you can afford. It can also be tempting to buy a house at the maximum amount for which you can obtain a loan for, but consider the implications on your budget and disposable income prior to becoming stretched too thin. Before getting your hopes up in the homebuying process, it is never a bad idea to give your lender a visit.

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Thursday, 17 June 2021