When you apply for a loan, your mortgage lender informs you of the maximum amount you can borrow, and this will help you get an idea of how much house you can afford. The question most buyers ask is how they reach this amount and what factors influence their decision?
Read on to understand the most common factors that lenders look at to know how much you can borrow.
Most lenders prefer monthly mortgage payments don’t exceed 28% of your gross monthly income. At this percentage, they estimate a borrower will not stretch their budget too far and pay the loan without missing any payments.
Your gross monthly income is the amount you earn before deductions and other obligations, including social security, taxes, child support, savings, alimony, disability, etc.
Be prepared to submit updated paystubs and bank statements as evidence of your income.
One crucial element in securing a mortgage is your credit score. Credit scores are based on your payment history, types of credit, length of credit history, the overall level of debt, and new credit applications.
If a lender finds your credit score falls below a specific range or discovers unfavorable marks, loan approval can still happen, but you’ll likely pay a higher mortgage rate.
That’s why it’s essential to monitor your credit if you plan to apply for a mortgage.
Another factor that lenders will examine is your DTI, or debt to income ratio. This ratio gives lenders insight into whether you’ll have enough income to cover both your new mortgage and any current debts you have, like credit cards, student loans, car payments, and the like.
The ratio is calculated by taking your total monthly debt and dividing it by your gross income. For example, an employee who earns $5,000 per month and has $500 monthly debt would have a DTI ratio of 10%.
Most lenders prefer a DTI ratio no greater than 36%.
The two most critical factors you must know before shopping for a home are how much you can borrow from the lender and how much you can afford. We can help you get answers to both of these questions. Our pre-qualification process is available online, and after sharing a few details about yourself and your income, we’ll be able to provide you with a detailed mortgage scenario.
Start the process right from our website and get the clarity and guidance you’ve been looking for from a mortgage professional.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 1141339
600 Anton Blvd Suite 1100
Costa Mesa, California 92626
Phone: (714) 496-9619
OCMORTGAGESOLUTIONS, INC strives to ensure that its services are accessible to people with disabilities. OCMORTGAGESOLUTIONS, INC has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
OCMORTGAGESOLUTIONS, INC makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows ocmortgagesolutions.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
OCMORTGAGESOLUTIONS, INC accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
OCMORTGAGESOLUTIONS, INC continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on OCMORTGAGESOLUTIONS, INC website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on OCMORTGAGESOLUTIONS, INC website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: firstname.lastname@example.org