Are you trying to figure out how much Portland home you can afford on your next real estate purchase?
I cannot stress this more but talk to a home loan specialist when you are thinking (even in the future) of buying Portland real estate. While the home loan process is not rocket science, it is not as simple as your online mortgage estimation calculator either. You might think you can get much more or much less than what you can actually afford. You will not know until you talk with a mortgage professional.
Here is some general information on what helps figure out your Portland real estate purchase limit. Lets keep this basic, your home buying power will ultimately depend on two things; how much you have available for the down payment & how much a financial institution will agree to lend you.
An established homeowner might be able to rely on home equity they could have to put towards a down payment. A first-time homebuyer will have to count on his or her savings as the principal resource for a down payment. If you don't have the savings, you should think twice, then think again before play any type of games with your credit cards, such as making a cash-advance to yourself for the amount needed for a down payment. Your debt-to-income ratio might fall out of the good zone and the interest you pay on the credit card will probably be more than the interest you would pay for the home mortgage.
The price you can afford to pay for a house may very well be limited by your ability to come up with the cash for the required down payment to obtain the loan, and the closing costs. With preparation and planning, setting aside funds earmarked specifically for a down payment on a regular basis will help you grow your down payment amount.
In addition to your down payment, the other major factor influencing how much you can afford to buy will be the loan amount. When you apply for a mortgage, the lender will consider several factors in determining the amount they are willing to loan you. These include (among others);
- current earnings
- existing debt
- credit history
- debt-to-income ratio
Debt-to-income ratio guidelines
Your monthly costs (including mortgage payments, property taxes, homeowner's insurance, and any HOA, condo or co-op fees) should total no more than 28-percent of your monthly gross (before-tax) income.
Your monthly housing costs PLUS other long-term debts should total no more than 36-percent of your monthly gross income.
Lenders feel that if they follow these guidelines, homeowners might be better able to pay off their mortgages in a timely manner. With these guidelines, lenders feel homeowners have a better chance of not falling into loan defaults and foreclosures.
Your (and coborrowers) debts and credit report will be considered in determining how much you can borrow. Make sure your credit history is as good as it can get because what you can afford to borrow will determine how much home you can buy.
When you apply for a mortgage, the lender will use all the relevant data:
- your income
- your existing debt
- the purchase price of the house
- your down payment
- the interest rate of the loan
- cost of property taxes and insurance
Now please note that "qualifying" for a loan is not getting a loan. Qualifying is only the first step to getting "approved" for the loan. The qualification process determines how large a mortgage you are eligible for. You can get pre-qualified for a loan without having a particular house in mind, and doing so will give you a better idea of what kind of home you can afford. Your loan application will be for the specific house you want to buy.
Bottom Line: All of the above are merely guidelines. Every loan and every applicant will differ. That is why everyone needs to speak with a lender first rather than try to figure it out themselves. People who trying to “run their own numbers” will add or subtract things that are wrong or important. Talk with a professional to know where you can start searching.
I have some good Portland lending contacts when you want to start the process.
He can be reached at 503.961.2181 or by e-mail at email@example.com
Originally posted on West Linn Real Estate.