How Much Mortgage can I Afford?

If you're looking to become a first-time home buyer, congratulations! This is an exciting time. While buying a home is a big decision, don't let the process overwhelm you. We're here to help make things easier by walking you through the top three things that affect how much mortgage you can afford:

In this video, we will go over the top three things that affect your ability to afford a mortgage:

There are many factors and moving pieces that cause mortgages to fluctuate, but the top 3 that we think have the biggest impact are:

1. Your Credit Score

• To tell you about credit scores, we need to start with a brief explanation of what credit is and how it works. Credit is essentially an arrangement where a borrower can receive something of value now and repay the lender at a later date. Your credit score is a number that represents your creditworthiness – or, in other words, how likely you are to repay a loan. Lenders use your credit score as one factor in deciding whether or not to give you a loan and what interest rate to charge you. Generally, the higher your credit score, the lower the interest rate you’ll be offered.

2. Your Down Payment Amount

• Downpayment is important because it represents the portion of the home's purchase price that you will be responsible for upfront. The bigger your down payment, the smaller your mortgage will be. Keep in mind, that you'll also need to factor in closing costs, which are typically 3-5% of your home's purchase price. There are also many programs available that can help with your down payment, so be sure to ask your lender about all of your options.

3. Your Employment

• Your monthly income is a huge factor in determining how much house you can afford. Lenders will want to see that you have a steady income and a good job history. They'll also want to know what your monthly debts are, in order to get an idea of your debt-to-income ratio. This is the percentage of your monthly income that goes towards paying down debts, and it's important because it shows lenders how much wiggle room you have in your budget for things like a mortgage payment.

If you think we missed a tip or have a burning question, let us know in the comments! And be sure to stay tuned for our next video where we will go over the mortgage application process step-by-step.

We hope this video helped you understand the top three things that affect how much mortgage you can afford. As always, if you have any questions, please reach out to us in the comments. We’re here to help!