Before you rush out to buy a new home, it helps to know the price range to shop in. You don't want to fall for a particular home, only to realize afterwards that the monthly mortgage payment is straining your finances.
This calculator will help you determine what you can afford based on the numbers lenders use to assess your financial situation.
Here are some tips to improve your maximum mortgage/loan amount:
- Pay off as many debts beforehand, particularly credit-card debt. Even a small balance of $100 shows a minimum payment on your credit report. This minimum payment is used in your debt ratios. Keep in mind that an update to your credit report may take up to 45 days.
- Pull your FREE credit report from all 3 credit bureaus at (AnnualCreditReport.com). Go through them and dispute anything you don't agree with. This can boost your credit score dramatically in a span of 60 days, which could mean a lower interest rate and lower monthly payments.
- Try to buy a home with 20% down. If that's impossible look for a home that's slightly less. Why? Because if you don't have 20% equity, the lender may require you to pay PMI (Private Mortgage Insurance), which can add around 0.3 percent to 1.15 percent of the original loan amount to your mortgage each year. For a $100,000 mortgage this would be $25-$96 extra per month. If you choose to put less down, just know that once you reach 20% equity on your home, you can cancel the PMI.