Charlotte homes are in high demand as supply is low and buyers are ready to move! Are you ready to sell your current home and move into the home you have been dreaming about? It is important that you know what you want in your new home and how much house you can afford.
Mortgage planners, like our team at Fairway Independent Mortgage, want to help you understand how your new home can fit in with your goals for your financial future. We are happy to explain the loan process and determine which loan is best for you and what you can qualify for. Lenders are chiefly concerned with your ability to repay your mortgage. To determine if you qualify for a loan, they will consider your credit history, your monthly gross income and how much cash you will be able to accumulate for a down payment. (Down payments generally average anywhere from 5% to 20% of the purchase price of the home.)
How much house can you afford? You can easily calculate the answer using two standard debt-to-income ratios:
- The housing expense (or front-end ratio) shows how much of your gross (pre-tax) monthly income would go toward the mortgage payment. As a general guideline, your monthly mortgage payment – including principal, interest, real estate taxes and homeowners insurance – should not exceed 28% of your gross monthly income. To calculate your housing expense, multiply your annual salary by 0.28, then divide by 12 (months). The answer is your maximum housing expense.
- The total debt-to-income (or back-end ratio) shows how much of your gross income would go toward all of your debt obligations including mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees. In general, your total monthly debt obligation should not exceed 36 percent of your gross income. To calculate your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12 (months). The answer is your maximum allowable debt to-income ratio.
Buying a new home can be very emotional as you balance the excitement with the worry and doubt that comes from making a larger purchase. With today’s lower home mortgage loan interest rates, right now is one of the best times to consider all of your home buying or selling options.
Whether you are buying a new home or looking to refinance your current home, you can trust Fairway Independent Mortgage of the Carolinas to make your home loan as stress free as possible. Call one of our offices today to get started or schedule an appointment with you to really look at your financial plans and help you make the best home loan decision or show you how the path toward ownership. Call us anytime. We have locations in Matthews, Charlotte, Lake Norman, Ballantyne, Union County, and Cotswold to make meeting convenient, or simply fill out our online application to get started.