The real estate prices in Florida are increasing and everybody wants to own a home. Not everyone can buy it for cash that’s why mortgages play such an important role in home ownership.
That’s why, either first time or seasoned borrowers always ask the question “How much home can I afford”? There is no universal answer on this question and it depends on a number of factors. Some of these factors are:
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Monthly income
Your monthly income is one of the factors that determine “how much mortgage you can afford”. As a matter of fact, it is the most important factor mortgage lenders look out before providing you mortgage preapproval. The way income is calculated for employees and self-employed is different. Of course, the bank has more stringent requirements for self employed people as they need to do more due diligence on how stable the business is.
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Credit score
The credit profile plays important role in your mortgage process. Every mortgage lender will check your credit profile and score. They will know how good your credit reputation has been over time and how many time you defaulted on your payments. Besides, probability on getting a mortgage it will effect your credit score and the program you can qualify for. If your credit score is too low you might be a good candidate for FHA because the interest rates is usually low and mortgage insurance with lower credit score.
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Down payment
It is required for any mortgages unless you are military veteran. There are some programs out there with 1 or 2% down payment. There is a good chance you will pay a higher interest rate with such low downpayment. However, you might not know about it as it’s not advertised. If you hear any programs with less than 3 % down payment, most probably there is a catch behind this program; I strongly recommend saving at least 3% for the down payment. Read here about how to get the best mortgage interest rate.
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Employment history
The nature of your job is another factor that can determine how much mortgage you can afford and if you can get a mortgage at all. Two years of employment history is required these day. It’s ok if you worked at different companies as long as it was a similar occupation or promotion within the same employer. If your job is relatively stable and you have predicted a possible promotion in the future, it looks better in the eyes of underwriter.
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The home’s location
The location of your potential home is a major determinant of How much of the mortgage can you afford? When mortgage banker is calculating your DTI (debt to income ratio), he will consider property taxes, HOA, insurance, Mortgage Insurance and Flood insurance If applicable. If these costs are high then the amount you can borrow will be less. That’s why if you want to borrow higher amount then looks for the property with low expenses associated with the house.
Having a home of your own in a nice neighborhood is a dream everybody wants to achieve. If you are considering to buy and not sure how much of the mortgage can you afford, fill out application and trusted Florida Mortgage Banker will be able to determine how much you can afford!
