How Much Mortgage Can You Really Afford
How Much Mortgage Can You Really Afford for a Denver, CO Home?
Owning a home can be a sign of independence and success. It allows you to build up equity and the mortgage interest and property taxes are tax-deductible. Can you afford it, though?
Reputable lenders look at a list of criteria to decide how much they’ll loan you.
This list includes:
• Credit score
• Existing assets including cash
• Car leases or loans
• Credit card balances
• Debt consolidation loans
• Home equity loans
• Installment loans
• Student loans
• Other monthly debts
• Size/source of your down payment
If you’d like to get an idea of what you can afford before talking to a lender, here are a few tools you can use to decide whether a Denver, Colorado home is within your budget:
• As a rule of thumb, your house hunting budget shouldn’t be more than 2.5 times your pre-tax annual income. If you earn $50,000 a year, your budget for house hunting should be around $125,000.
• Your Housing Expense Ratio, which is principal, interest, taxes and insurance (PITI) shouldn’t be more than 25% to 28% of your pre-tax monthly income.
• You’re Debt-to-Income Ratio should be no more than 36% of your pre-tax monthly income. This is the ratio between how much you owe and how much you earn.
• Use an online calculator to figure how much home you can afford.
