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(903) 455-1041     3101 Joe Ramsey Blvd. Suite 107, Greenville, TX 75401

Financial Lifestyle Management Greenville Texas – Vicki Ward

Financial Lifestyle Management Greenville Texas - Vicki Ward

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How much can I afford to borrow?

Greenville, Texas Financial Advisor

Who wouldn’t want to live in a place they can call home? Unfortunately, there are other aspects to consider, such as mortgage – in order to get a good deal, you must have a good credit score, be debt-free, save money for a down payment, and so on. Keep in mind that mortgage firms will always check to see if you have the financial means to repay what you owe them.

That is why, when it comes to your ideal home, you should be quite certain of how much you can afford to borrow. The following factors influence this:
Front-end ratio
Your monthly mortgage payment, which includes homeowners insurance, property taxes, principle, and interest, should not exceed 28% of your monthly income. The formula for computing this is: annual salary x 0.28 / 12 (for months).

Back-end ratio
This is the total debt-to-income ratio, which should not exceed 36%. It refers to the entire debt, which includes mortgages, debt obligations, child support, vehicle loans, credit card bills, and student loans, among other things. The formula for this ratio = annual salary x 0.36 / 12 (for months).

What type of mortgage suits you?

Fixed-rate and adjustable-rate mortgages are the two types of mortgages available for homes. The former has a higher interest rate because the lender must cover any losses if the interest rate rises in the future while the mortgage payment stays the same. The fixed rate mortgage method has both a positive and a con: the borrower is unaffected if interest rates rise in the coming months, but the mortgage payment amount is currently greater, making it slightly unmanageable for everyone. However, the amount remains fixed, allowing you to better arrange your finances.

Because of the low interest rate, an adjustable rate mortgage is less expensive than a fixed-rate loan. On the plus side, because the mortgage rate and payment are substantially lower, the borrower can ask for a larger loan. However, if the interest rate rises unexpectedly, the monthly payments may increase.

Buying a house necessitates a great deal of thought and planning. Start your homework early and look at interest rate trends to get a sense of which way the market is likely to swing. Try to save as much as you can before looking for a mortgage loan so that you are financially prepared.

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Vicki Ward CFP®
Financial Lifestyle Management

3101 Joe Ramsey Blvd. Suite #107
Greenville, TX 75401

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