W F Snyder Co

How Much Home Can You Afford?

Save yourself in your home search by taking the time to be pre-qualified for a mortgage!!

It lets you know how much home you can afford.
Looking at homes priced higher than you can afford can be very frustrating because when you start looking at what you can afford, you will be disappointed!!
If you look at homes lower than you can afford, you may not find the features you want!!
When you find the home you want and make an offer, the seller will be motivated to accept since he knows you can afford it!!

Sellers (and their agents) look very closely at a buyer's financial qualifications in considering the offer. Most contracts in Georgia are contingent on financing -- if a seller accepts an offer and then the buyer isn't qualified and the loan doesn't go through, the seller will have lost marketing time and may incur other costs -- such as the seller purchased a new home which he cannot settle on until his old home is sold! So having a buyer pre-qualified is a real PLUS!

Decide how much you can afford in a monthly mortgage payment. Lenders have guidelines to determine the amount of mortgage you can afford. Your real estate agent may help you with this or may give you names of reputable mortgage lenders you can meet with who will pre-qualify you at no cost to you! The general guidelines are as follows:

Conventional loans = 28% front ratio; 36% back ratio
FHA loans = 29% front ratio; 41% back ratio
VA loans = 41% total ratio

Front ratio is the total allowed for your housing payment which includes principal+interest+taxes+hazard insurance+mortgage insurance+homeowner/condo association dues. For example: front ratio x monthly gross (before payroll deductions) = monthly housing payment.

Back ratio is the total allowed for ALL your monthly debts: housing(above)+car payment+credit cards+school loans+monthly installment loans. Don't include utilities/life insurance/medical/food/clothing, etc.

Lenders may be flexible with the ratios depending on your past credit history/savings pattern/job stability. But only a lender can make this determination and it may require your paying for a full-blown credit check (usually $50-$60). However, you would have to pay for this eventually -- just be sure the lender you're paying is the lender you're going to use for your loan. Credit reports are confidential and lenders normally will not transfer them to another lender! Real estate agents usually stick strictly to the guidelines in determining how much home to show you.

Once you know how much your monthly mortgage payment can be, you will need to deduct from that amount an estimate of:

taxes (see Real Estate Tax Rates),
hazard insurance,
mortgage insurance,
homeowner/condo dues.

The balance is for principal and interest. To determine this amount, you will need the interest rate for that day for the mortgage program you intend to use (see Finding the Right Mortgage). Add to that your down payment and you have a realistic idea of the price of your new home!

Your interest rate will make a big difference, too. You'll be able to buy a higher-priced home if you pay 7.5% interest than if you pay 9% interest.

Please choose from the following:

How Much Home Can You Afford?	Financing Your New Home	Finding the Right Mortgage	Earnest Money/Down Payment
General Closing Costs	VA Settlement/Closing Costs	Mortgage Insurance	Seller Contributions

Purchasing a HUD Foreclosed Property	Questions & Answers About HUD Homes
Investor/Foreclosure Information	Glossary of Real Estate Terms

How To Begin?	Home Buying the Easy Way	Why Work With a Realtor
Selecting a Realtor	Your Relationship with a Realtor	Moving Tips

Financing Information	Home Inspections
Other Inspections	Environmental Inspections

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