If you are more than ready to head towards homeownership, you may thing the only thing left to do is secure a home loan. However, you may first need to decide if you can realistically afford that Houston property you have your eye on.
A Closer Look at your Personal Finances
First thing’s first: before you think about applying for a home loan you have to take a good look at your personal finances. The biggest factor when determining how much home you can afford is your income. However, a lender will ultimately determine your ability to obtain a home loan once they figure out how much you earn versus how much you want to borrow.
Your Monthly Income
So, your first step before heading to a lender is to determine your monthly income. Any documented income should be considered, including both regular and intermittent income; don’t forget to include income from alimony, lottery winnings, real estate and stocks, as well. However, if you are unable to document your income and it doesn’t show up on your taxes, you will likely not be able to use it as a source of income when purchasing a Montrose home.
Your Monthly Debt Obligations
Next, you will need to calculate your monthly debt obligations. Any type of monthly debt should be considered, including; credit cards, auto loans, installment loans, personal loans or any other monthly obligations, such as alimony or child support. Debts that are expected to be paid off within six months generally do not need to be included in your monthly debt amounts.
Once you have your monthly income and your monthly debt payments you can better get an idea of how much home you can afford, and if you can afford that perfect home you want.
Keep in mind that your monthly housing expense should not total any more than 28 percent of your gross monthly income. All taxes and insurance should be included in that 28 percent. If you exceed that percentage, your lender will likely tell you that your debt-to-income ratio is too high to secure a loan.
Before you head to a lender, gather together all of your financial information so that a loan officer can better guide regarding the amount of house you can afford.