Qualifications ChecklistThe following section will allow you to better understand the information that is being used to figure out whether or not you have the capability to be eligible for a loan. By looking at your financial situation, expenses and debts you will likely be able to figure out how big of a loan the lender will offer you. Lenders will look at your income, debts and any savings that you may have in order to decide how much money to offer to lend to you for the purchase of your home. When you consult with a lender, you will receive an estimate that explains how much you money you will get towards purchasing your home. Estimates are often the very maximum the lender is willing to offer you and the maximum that he or she will lend to you. Take a look at the lifestyle you lead and based on that information you should carefully decide how much to spend on buying your home. In certain cases, the person purchasing the home does not want to spend a lot of their income on a house that with some planning they would be able to easily afford. In this article you will find more details about the information lenders use to decide how much you can afford to spend on a home. Some of this information includes income, debt, and other housing related expenses. Income Your income is a significant part in figuring out how much you can afford to pay for any of your house related expenses. Information about your income is included in the Principal, Interest, Taxes and Insurance, which are also referred to as the PITI, and the debt ratio calculations. The lender's decision to offer you a loan will oftentimes depend on your capability of meeting the PITI and the debt ratio. There are many loan programs that have different rules in terms of the percentage of your income that is used to pay for monthly house payments. For instance, any government loan programs such as the FHA or the VA include ratios that let you apply a higher proportion of your income to the loan. Conventional loan ratios usually are approximately 28% whereas the VA lets you to apply 41% and the FAH permits you to apply 29%. In simpler terms, what this is saying is that depending on your loan program, your monthly loan payments cannot exceed 28%, 29% or 41% of the total income you make per month. Debt A lender will cautiously look at your debt information when he or she reviews your capability to repay the loan. Any of the information about your debts is part of the PITI or the debt ratio calculation. Different loan programs will have varying rules when it comes to determining the percentage of income that can be applied to long-term debt. The capability you have to meet the ratio requirements is likely to have an influence on whether or not the lender will decide to offer you a loan. Any government programs, for instance the FHA and the VA, let you apply a greater portion of your debt requirements towards the loan. Whereas conventional loan debt ratios usually are approximately 36%, the VA and FHA let you apply 41%. What this means is that is that depending on your loan program, your monthly loan payments cannot exceed 36% or 41% of the total income you make per month. Housing-related expenses These are the expenses that you definitely need to consider as lenders look at this category when determining the value of your loan. Housing-related expenses will vary on the location and the type of home you want to own. All this will impact the amount of the loan for which you are qualified for and might be one of the most important factors when deciding to purchase a home. You should also take into consideration how your budget will be impacted by those housing expenses. When purchasing a home, your monthly expenses may go up and thus you will have less money to spend on yourself and your lifestyle. These are all the things that you need to take into consideration when buying a home. If by any chance you have a problem with managing your money well consider consulting a financial planner as they will come up with a plan that fits your budget and thus you are less likely to run into problems with paying off your debts as well as your loan. It is crucial to plan ahead and make sure that you are not living on a tight budget because you never know when unexpected expenses may come up such as car repairs or medical bills. Before you purchase your home, consider saving a sizable amount of money that you will not put towards a down payment but instead will keep for those unexpected expenses. Most importantly, be honest with yourself about your financial situation and debts, take a critical look at your spending habits and ask yourself is there is any room for you to save some money. You may want to eliminate eating out or making unnecessary purchases often. Here are some additional things, which tend to be typical expenses that come with purchasing a home: Property Tax - This expense is highly dependant on the location of your home/ the home you are planning to buy. Various counties and states will have different property tax requirements. As a homebuyer, it would be wise for you to think about how this extra expense will change the total of your monthly expenses. Maintenance Costs - This expense basically includes anything that involves maintaining and up keeping the house as well as the property. These costs include anything from washers in the faucets to a new roof; a new garage door or a heating system and these costs also vary by geographic location, size, and the age of the home. Utility Costs - This expense consist of items such as electric, gas, water, heating and air conditioning and vary by geographic location, size, time of year, and age of the home. You may want to factor any construction or repairs that take place on any of the above mentioned items into your utility cost estimates. Mortgage insurance (if applicable) - This cost may differ by every mortgage insurance company, lender, loan product, and loan-to-value percentage of the loan. Other Costs - These expenses vary depending on the type of home you purchase and they include costs such as these:
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