Qualifying For a Mortgage

In today’s market, an “affordable” home is not so much determined by sales price as it is by the financing which translates that price into a monthly payment. A house hunter’s first step is to set a housing budget, then go shopping for the house (price) and payments (P.I.T.I.) that fit that budget.

Even though there are many ways to qualify to buy a home, make sure the monthly payment makes sense for you. How large a payment you qualify for will depend upon a variety of factors. These factors include credit history, size of down payment, and length of employment. Everyone’s circumstances are different.

How Much House Can I Afford?

The key items are the size of the down payment, interest rate, any monthly property fees, and the amount of the mortgage. The down payment might be zero in the case of VA-backed mortgages. A down payment of 20% or more on a conventional loan will eliminate the need for mortgage insurance.

One Caution

The larger the down payment, the less money you need to borrow. This means a lower monthly payment. However, remember that in addition to your down payment and monthly payments, you will need money to pay for closing costs, moving, appliances, household setup, a reserve for family emergencies, and other miscellaneous items. So don’t plan to put your last penny down on the closing table.