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Defining your price range and
your preferences
Where
to begin
Before you start driving around looking for yard signs, do some homework
to fine-tune your dreams and expectations.
Know
how much house you can afford
Review your budget and determine how much you want to pay each month.
Lenders will consider the home’s sale price and your down payment in
determining how much to loan you, but your monthly payment is of primary
importance. In addition, housing costs are usually more than just
mortgage
principal and interest, because they often include property taxes and
insurance.
As a general rule, your monthly housing cost should not exceed 28
percent of your gross monthly income. If you have outstanding long-term
debt (things like car loans, student loans or credit card balances),
that monthly debt plus your monthly housing costs shouldn’t exceed 36
percent of your monthly gross income.
Ask your sales professional for a Lender Information Worksheet. This
worksheet allows you to organize all those details needed for the
financing application process. It will also help you itemize your living
expenses and income, so you may analyze your budget more thoroughly.
Mortgage Chart — Your guide to affordability
Your mortgage power may surprise you. This chart shows how much house
you can afford at any given interest rate. To use it, simply find the
monthly payment you can afford and read across to the
nearest current interest rate. The point where the two intersect shows
you how much mortgage that monthly payment will buy. Many lenders offer
mortgage preapprovals, and this can be a real time-saver when you come
upon the house you want to buy. Mortgage preapproval is like securing a
loan before you find a house, and it’s real peace of mind to know
exactly what you can afford. Payments are based on a 30-year
amortization and include principal and interest only.
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