How Much House Can You Afford?
How much house you can afford is determined by the mortgage lender and is based upon a variety of financial factors. When you begin the mortgage process, you will need to provide income and asset information to your lender. They will also request a credit report on your behalf, to assist in determining your eligibility for a loan.
One of the most important factors is your household income that is either your individual income or that of you and your spouse or legal partner combined if you are applying for the loan jointly. In some cases, borrowers can utilize a “co-signer” who is not a member of the household but is willing to take on the full responsibility of the mortgage payments and terms.
The process of qualifying the borrower is called “underwriting”, and is done by a professionally trained mortgage underwriter that works for your lender. Although the Loan Officer does not underwrite the loan, Loan Officers are very familiar with the requirements and rules that the lender must follow to approve the borrower for a particular loan amount and can guide you through the process. Borrowers must also understand that just because a lender approves you for a particular loan amount, that does not mean that you should or must purchase a home for that amount. The “approved” amount is simply the maximum amount that the lender is willing to lend to the borrower to purchase a home given their specific financial circumstances including income, assets, monthly and long-term liabilities, expenses and credit score.
