Step 4: Secure Financing

How much home can you comfortably afford?

Your lender decides what you can borrow. But you decide what you can afford.

Sarah and Alex each earn $4,000 a month. Traditionally, their maximum housing payments would be 28 percent of their incomes, or $1,120.

However, their financial profiles are really very different, leading them to very different decisions about how much they can afford. See below:

Sarah has $15,000 in student loans, just bought a new car, and has several credit cards with balances.
Car payment $350
Student loans $150
Credit card minimum $150
Monthly nohousing debt $650
Maximum total debt payment $1,440
(36 percent of $4,000) - $650
Safe housing payment $790
Alex's student loans are paid off, he has little credit card debt, and his car is an economy model.
Car payment $200
Credit card minimum +$50
Monthly nonhhousing debt $250
Maxiumum total debt payment $1,440
(36 percent of $4,000) - $250
Safe housing payment $1,190

Follow these Six Steps to financing your home:

1. Choose a loan officer
2. Make a loan application and get preapproved
3. Determine what you want to pay and select a loan option
4. Submit to the lender an accepted purchase offer contract
5. Get an appraisal and title commitment
6. Obtain funding at closing

Remember, you don't need to save up a lot of money for the down payment. A conventional mortgage can require as little as a 5 percent down payment, and there are even some first-time buyer programs and FHA loans that require even less. And once again, only you can decide what you can afford.

For the last twenty years, the mortgage interest rate averaged approximately 8 percent in the United States. What are the interest rates today and what would your savings be? The answer is less than half of the 20 year average which means now is the time to buy. Call us today if you have any questions getting started 859-653-9286