What Size Mortgage Can You Afford? – Part 2
Posted by RealEstate_Guru
Many people have other long-term debts besides mortgage payments, such as car payments or student loan payments. These need to be added into the calculation when you’re considering houses for sale in Raleigh North Carolina.
Lenders like to see a total monthly debt load not greater than 38% to 48% of your gross monthly income. In our example from Part 1 of this article, if the monthly gross income of $4187 is multiplied by a mid-range debt load percentage of 40%, the result equals a monthly payment of $1675 that includes both the mortgage and other long-term monthly debt obligations. Unfortunately, with the use of “automated underwriting,” in which loan determinations are made by computers rather than people, the debt-to-income ratio can be as high as 50%. Underwriting is the process of assessing the risk of lending to a borrower by applying a specific set of parameters.
Another important expense borrowers need to consider is the cost of homeowners or property insurance. Lenders usually require properties to be insured for the amount of the mortgage, which may or may not be the full value of the home. If the lender doesn’t require insurance for the full value of the home, borrowers should consider purchasing supplemental insurance so that the complete replacement value of the home is fully covered. Two other factors to consider are the total monthly utility bills and ongoing maintenance costs like home owner’s association fees.
Borrowers should consider pre-qualifying for a loan, which gives them a true idea of the type and amount of home and mortgage they can afford. Finally, it’s possible to find a good variety of low-cost loan programs, both government and conventional, for moderate- or low-income families that apply to the sale of houses in Raleigh North Carolina. In some cases, borrowers can receive reduced rates in exchange for undergoing financial and/or credit counseling.
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