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You are the only person who can decide how much you feel comfortable borrowing and what type of mortgage is best for you. A rule of thumb that many people use is the 21/2 times table, meaning you could be able to qualify for 21/2 times your income. Here's an example: a couple making $40,000 per year could qualify for a loan of $100,000. This information can be misleading because the amount of the loan a person qualifies for can vary greatly due to factors like debt and other financial responsibilities.
However, it is usually advised that your mortgage payments should not exceed 28% of your gross monthly income. And, all your debts and payments should not exceed 36% of your gross monthly income.
The more money you are able to put down, the smaller your mortgage total and monthly payments will be. Down payments vary, but usually range from 5% to 20%. If you put down less than 20%, you will probably be required to pay for private mortgage insurance to protect the financial lending institution in case you fail to make your payments.
It is important to consider all the additional expenses that can occur when buying a house. These include, but are not limited to, closing costs, title insurance, appraisal fees, survey fees, document preparation fees, deposits and moving expenses. The costs on each of these individual things can vary greatly. However, your Realtor can negotiate with the seller to pay for things like closing costs.
To determine how much you can truly afford, it is advised that you consult with an experienced Realtor like Judy who can answer the tough questions and refer you to competent and successful individuals in the mortgage and financial world.