Affordable home loans could enable a buyer to secure a comfortable monthly housing payment. Whether financing is needed for a newly constructed property or for an existing home, a buyer must ensure that reasonable terms are obtained. Before contacting a real estate agent, buyers should be approved for an affordable home loan.
Estimate an Affordable Home Payment
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Historical logic suggested that a buyer triple his annual wages to determine an adequate loan amount. For instance, if a buyer earned $60,000 for the previous year, he could shop for homes in the $180,000 price range. A buyer’s down payment, the interest rate and the loan term are important factors that must be considered to obtain an accurate estimate. A calculator with amortization features might be helpful toward calculating an affordable home loan payment.
Online mortgage calculators are useful for quick monthly payment computations. For a faster estimate, a buyer could total his monthly payments that appear on consumer credit bureau records, and subtract the amount from his total monthly income. The result would be multiplied times 12 months, and then tripled to estimate an affordable price range for a home. For instance, an annual income of $60,000 is equivalent to $5,000 per month. If a buyer subtracts, $1,000 in monthly debts from $5,000 in monthly income, the result equals $4,000 per month. Multiplied for 12 months would reflect $48,000 per year. After tripling $48,000, a buyer could use $144,000 as a generic estimate for financing. Higher loan amounts may be realized in proportion to a buyer’s funds for a down payment and for closing costs.
Gather Your Financial Documents
Assemble a folder that contains your bank statements and recent income records. Mortgage lenders typically require pay stubs that cover a 30-day period, tax returns for the preceding two-year period and documented proof of any income used toward qualifying purposes. Bank statements, retirement fund statements and proof of other financial assets could influence a lender’s decision. Financial documents that validate a buyer’s ability to supply funds for a down payment or for financial reserves may improve certain financing terms, too.
Speak With a Mortgage Loan Officer
A mortgage loan officer can review your information to determine whether you’ll qualify for a home loan. After assessing your credit, income and financial resources, a loan officer can suggest an affordable price range for your home purchase. Provide truthful details about your financial assets and your income, as a lender will meticulously verify your information.
Compare Financing Offers From Other Mortgage Lenders
Get home financing quotes from several mortgage lenders. Inquire about a lender’s interest rates, points, upfront fees and other closing costs. It’s a prudent idea to request a good-faith estimate from competing lenders. Generally, the lowest rate and fee combination will provide more attractive terms for your home loan.
Submit Information for Underwriting
After selecting a mortgage company to finance the purchase of a home, you’ll need to submit lender-requested items for an underwriting review. A lending decision is usually made within a few days. If a loan approval is generated, an underwriter may request additional information to finalize certain conditions. Submitting your information in a timely manner might position you to avoid various underwriting delays.
Mortgage interest rates and the terms will vary among lending institutions. A thorough search for favorable lending terms might enable you to save a tidy sum each year. An affordable mortgage loan may increase your ability to maintain the ownership of your home.