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  • Alex Mizerski

What Size Mortgage Can I Afford? Factors to Consider When Determining Your Budget




If you're in the market for a mortgage, you may be wondering "What size mortgage can I afford?" It's a common question, and it's important to get a realistic idea of what you can afford before you start looking for a home. Here are some factors to consider when determining your budget:

  1. Your income: Your income is a key factor in determining what size mortgage you can afford. Lenders generally recommend that your monthly mortgage payment (including principal, interest, taxes, and insurance) not exceed 28% of your gross monthly income. However, it's ultimately up to you to decide what you're comfortable with.

  2. Your debts: In addition to your mortgage payment, you'll also need to consider your other debts when determining what size mortgage you can afford. These may include credit card payments, student loans, and car loans. Lenders generally recommend that your total monthly debt payments (including your mortgage) not exceed 36% of your gross monthly income.

  3. Your down payment: The size of your down payment can also impact the size of the mortgage you can afford. A larger down payment means you'll need to borrow less, which could result in a lower monthly mortgage payment.

  4. Your credit score: Your credit score is an important factor in determining what size mortgage you can afford, as it affects the interest rate you'll be offered. A higher credit score can result in a lower interest rate, which could make it easier for you to afford a larger mortgage.

  5. Your local housing market: The local housing market can also impact the size of the mortgage you can afford. If home prices are high in your area, you may need to adjust your budget accordingly.

By considering these factors and working with a lender, you can get a better idea of what size mortgage you can afford. It's important to be realistic and not stretch your budget too thin, as you'll also need to consider ongoing expenses such as maintenance and repairs.

In summary, determining what size mortgage you can afford requires a careful review of your income, debts, down payment, credit score, and local housing market. By considering these factors, you can make a more informed decision about the size of the mortgage that's right for you.

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