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Before you start to look at houses, call one of our professional Direct Home Mortgage loan officers. Without any obligation on your part, they can assist you through a confidential loan pre-qualification process. This gives you the buying power you'll need to find the right property at the right price!
As an estimate, lenders say you can afford to buy a home equal in price to three times your gross annual income.
The price you can afford to pay for a home will depend on the following six factors:
- Your income
- The amount down payment, closing costs and reserves as may be required by the lender
- Your outstanding debts
- Your credit history
- The type of mortgage
- Current interest rates
Lenders analyze your income in relation to the projected expense of owning the home. The housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on the new loan, property taxes and hazard insurance. The sum of these costs is referred to as "PITI." The outstanding debts you have determine the amount of loan you can get. Monthly homeowners' association fees, if you're purchasing a home with common facilities or a gated / private community, are added to the PITI.
Monthly private mortgage insurance is also added to the PITI. The housing expense-to-income ratio should be within the 28 to 33 percent range, some lenders will go higher under certain circumstances. The total debt-to-income ratio should be in the 34 to 38 percent range.
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