Your lender decides what you can borrow, but you decide what you can afford when you buy a home. Lenders are careful, but they make qualification decisions based on averages and formulas. They will not understand the nuances of your lifestyle or personal spending patterns quite as well as you do. So, leave a little room for the unexpected – for all the new opportunities your home will give you to spend money on furnishings, landscaping, repairs, and more.
Historically, banks use a ratio called 28/36 to decide how much borrowers may borrow. An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent. As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market though, we urge you to think carefully before stretching your budget quite so much.
Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.
Call 817-988-8664 or contact us online to let The Green Team know how we can help you buy your dream home.
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