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This article brought to you courtesy of Robert Groves, Senior Mortgage Broker at Minuteman Mortgage, News-Times Insider Mortgage Expert.

Robert Groves

The cost of homes these days seems astronomical. Median home prices here were up 16.6% compared to last year, at $519,000 per REDFIN. If you're pondering a home purchase right now, the important number to know is, how much can you afford? You don't want to commit to a price that is beyond your means.

You need to have a bulls-eye focus on what is in your financial reach, know your top number. How do you find this out? There are some online home affordability calculators but it's best to talk to a mortgage lender about getting a pre-approval. This is where the lender scrutinizes your income, assets, credit, debts, and down payment amount and agrees to a loan amount to finance the home purchase.

Based on the information gathered above, debt to income ratios are calculated. The first ratio is the proposed new house payment containing the principal, interest, property taxes and homeowner's insurance divided by your gross monthly income; the second ratio is the new proposed house payment plus monthly debts like credit cards, or car payments, divided by your gross monthly income. These DTI ratios determine how much you can afford. The lender's various loan products determine the DTI thresholds.

The pre-approval gauges what home price you can afford. You know your finances best. Run your own numbers and consider not just your income and debts, but every possible expense too. This helps you with the homebuying budget and affordability.

Robert Groves, Senior Mortgage Broker

Minuteman Mortgage

5635 N.E. Elam Young Parkway, Suite 308

Hillsboro, OR 97124

602-460-2374

www.MinutemanMortgage.com

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