Deciding how much house you can afford

Although your lender will decide what you can borrow you must decide what you can afford to spend on your new home.

Lenders are careful when taking the risk of writing a load, but they only make qualification decisions based on averages and formulas (not usually a case by case base like they did in the old days). They won’t understand your spending patterns quite as well as you do. So make sure to leave a little extra cash ever month for the unexpected – for all the new opportunities (there are plenty) your home will give you to spend your money for you, from furnishings, to landscaping, to repairs such as that blown water heater to leaky roof.

Usually, banks use a ratio for your loan called 28/36 to decide just how much people could borrow. An approved housing payment couldn’t be more than 28 percent of your gross monthly income, and his or her total debt load, this would include your expenses like car payments, student loans, and credit card payments, couldn’t be more than 36 percent.  Since home prices have increased, some of the lenders have changed their practices a bit by stretching these ratios to as high as 50 percent. Even if your market has increased,  i would urge you to think long and carefully before you stretch your budget too so much.

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