Ways To Figure Out How Big Home Loans Are
You can start with the rule of thumb that says you can afford to pay 3 times more than what you gross in a year for your home.
If your gross earnings are $100,000, by this rule you can afford to pay up to $300,000 for your home.
The rule doesn't take into account down payment amounts or mortgage rates, specifically, the mortgage rate you're likely to get.
You're better off considering your house payments as a percentage of your gross income.
To make things better yet, consider that taking 20% out of $25,000 leaves only $20,000 for your other expenses while 50% out of $300,000 leaves $150,000.
If you've been paying rent or have a mortgage now, a good way to do things is to look at what happened last month and how you felt about it.
If you're a renter, don't forget to include the tax benefits (you don't pay taxes on the interest portion of your monthly payments and you can depreciate your home).
Generally speaking, if you get the deduction and depreciation, you can spend about 33% more on house payments (mortgage, property taxes, property insurance) than you did on your rent and end up in the same place financially.
You can't figure out what you can afford unless you know what your mortgage rate is going to be.
Whether you''re Googling 'Mortgage Brokers Chicago' or some other term, start your search for a loan source early, long before you plan to close. It takes time to get a good mortgage broker. There might be surprises in your credit reports.
