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How Much Can You Afford to Spend on a House?

        Calculating how much you can afford to spend on a house, and how much
        credit you can expect  to be approved for, is a complicated equation with
        numerous factors coming into play.  While expert advice is best obtained
        from a mortgage professional, it is helpful to understand a number of basic
        concepts.
        ‹   How much debt are you carrying? Banks typically determine your loan
           size based on your debt to income ratio (DTI); they will not allow your
           monthly debt payments to be more than a certain percentage, often 36%,
           of your income. So if you already have student loans or car financing, you
           will generally not be able to receive as large a mortgage. DTI limits can
           vary significantly between different lenders.

        ‹   Do you have a stable, documented source of income? Even if you have
           a lot of cash on hand, if you can’t prove that you have a reliable income
           source, you may not be able to obtain a sufficient mortgage.
        ‹   Are  you planning  to finance  your payments  with rental income? In
           Lakewood, many people rely on rentable apartments to help meet their
           mortgage payments. However, this income will rarely count on your loan
           application, even if the apartment has all the necessary permits. While
           a rental apartment can still help  you afford  your monthly mortgage
           payment, do not rely on it to secure the loan in the first place.
        ‹   What is your credit score? The higher your credit score, the lower the
           interest rate  you  will be able  to secure.  This  will impact  your monthly
           payments.
        When you have determined the maximum monthly payment you can make,
        you are ready to determine how much you can afford to spend on a house.


        Additional Closing and Ownership Costs

        Remember: In addition to the down payment and monthly payments, there
        are other required fees.
        ‹   Home appraisal: Required by the mortgage lender, this can cost between
           $350 and $500.
        ‹   Closing fee for attorney: This typically ranges from $1200-$1800.
        ‹   Title policy: This is about 1% of the loan cost.
        ‹   Homeowner’s insurance: While this is typically paid as part of the monthly



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