Your Borrowing Power
You may currently seek the best mortgage quote you
can find, but really, before that step, you really need
to sit down and determine how much you will be allowed
to borrow based upon your savings, income and normal
monthly expenses. Real estate agents like to work with
buyers who have an idea of what they can afford and
are likely to be approved for a mortgage.
First, select lenders whose rates and terms seem competitive,
and then make appointments with them to discuss your
mortgage buying power. These lenders will likely ask
you a variety of questions that will help them determine
if they can afford to lend you.
Usually, a single applicant can borrow about 3½
times her/his annual income. With joint applicants,
you can borrow 3 ½ times the main annual income
in addition to one times the second income or get a
loan for 2 ½ times the joint income. Someone
who is self-employed will likely have to submit three
years worth of audited statements of accounts from which
a net profit can be determined. Most lenders have their
own rules associated with determining how much money
they can loan each applicant.
Once you have figured out how much you can afford to
borrow, you should calculate how much you can pay toward
a monthly mortgage. Calculate your monthly income by
adding your net salary, plus your partner’s net
salary. This is your total income.
Now look at your monthly expenses. Select all the ones
that may apply to you and others such as electricity,
telephone, sewer and water, gas bills, children’s
bills, credit card expenses, cable TV, insurance, food,
medical bills, non-food shopping, personal savings,
travel, yard maintenance, hobbies, entertainment, church
funds, pet food, clothing, presents, home entertainment.
Now, you have an idea of your total monthly expenses
from which you can subtract your total monthly income
so that you can determine the maximum amount that you
can afford for monthly mortgage payments.