You've probably heard that your credit score is all-important when looking to buy a home. While it's true that your credit score will affect your loan, there are other factors to look into when shopping for a home loan.
Take a few minutes to ask yourself the three questions below. They will help prepare you for finding and getting the best loan - one that is realistic about how much home you can really afford.
The guideline ratio for most lenders is 33/38, which means that the cost for housing is 33% of the monthly income while the cost for housing plus the other consumer debt is 38% of the total monthly income. These guideline numbers can change with your credit score and down payment amount. There are various free DTI calculators online.
As you begin your search for a new home, having a realistic sense of how much money you can use as down payment plus the maximum you can afford per month for your housing costs will save you from disappointment. Use tools such as RateMarketplace.com's online Mortgage Payment Calculator [LINK to http://www.ratemarketplace.com/mortgage/calculators/mortgage-payment-calculator.html] for a better idea of what your monthly costs will be with a variety of loans. After all, that mansion on the bay with the pool and hot tub may look good on paper, but it could be as cold as ice if you don't have enough money to pay the heating and utility bills.
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