Home Mortgage Affordability

If you are thinking of buying your own house by taking a mortgage loan, then the question that comes to your mind first is ‘ How much can I afford for a house payment ’. This question is very natural because whenever you take a mortgage loan, you have to start paying every month towards your mortgage loan. In order to ensure that you will find no problem in making monthly payments for the house loan, you need to judge your mortgage affordability much ahead of applying for a mortgage loan. If you want to know that exactly how much you can afford every month for a house payment, then you need to consider some important factors that affect your mortgage affordability. These factors are discussed below:

Factors that Influence Your Mortgage Affordability

•   Before approving any house loan, the mortgage lenders check the debt-to-income ratio of the loan applicant. Your debt-to-income ratio determines whether you will get the loan or not and if you get, what will be the loan amount. So, naturally your mortgage affordability depends on your debt-to-income ratio.

 

• Your debt-to-income ratio actually shows how much of your income goes towards repaying your debts. So, by debt-to-income ratio, the mortgage lenders decide whether you will be able to take the load of another loan i.e. the house loan.

 

• In general, you can easily get a mortgage loan if your debt-to-income ratio is less than 36%. A ratio of 36% is considered as the upper limit by the lenders. If you hold a debt-to-income ratio higher than 36%, then you can be denied of the house loan or even if your loan gets approved you may need to pay high rate of interest on the house loan.

 

• Even with a debt-to-income ratio as high as 45%, you can get a mortgage loan. This is possible under some special mortgage programs like Veterans Administration Mortgage Program and Federal Housing Authority Mortgage Program.

 

• Before approving the mortgage loan, the lenders also check that how much of your gross monthly income is spent on the household expenses. If the ratio is less than 28%, then your loan approval becomes quite easy.