Key Factors in Determining Your Borrowing Power

• Focus on Affordability
• Lenders may approve you for more than you can comfortably afford.
• Use the 28% rule: mortgage payments shouldn't exceed 28% of your pre-tax income.

• Factor in homeownership costs: property taxes, insurance, maintenance, and PMI if your down payment is under 20%.

• Mortgage Terms Matter

• 30-Year Fixed: Lower monthly payments but higher total interest.
• 15-Year Fixed: Higher payments but saves on long-term interest.

• Adjustable-Rate Mortgages (ARMs): Lower initial rate, good for short-term stays.

• Down Payment and Closing Costs

• Aim for 20% down to avoid PMI.
• Budget for closing costs (2%-6% of the home price).

What Affects the Loan Amount You Can Get?

• Debt-to-Income (DTI) Ratio
• Lenders typically prefer total debts to be less than 36% of your monthly income.

• Use a DTI calculator to check where you stand.

• Loan-to-Value (LTV) Ratio

• Based on your down payment; a larger down payment means a lower LTV and better loan terms.

• Credit Score

• Minimum score of 620 for most lenders.
• Higher scores improve loan pricing and approval odds.

Tips to Borrow More

• Increase Your Down Payment

• A larger upfront payment reduces risk for lenders.

• Pay Down Existing Debt

• Reduces your DTI and may boost your credit score.

• Adjust Home Priorities

• Consider a starter home or smaller property to fit your budget.

• Compare Lenders

• Interest rates and loan amounts can vary widely. Shop around for the best deal.

How to Estimate Borrowing Power

• Use online calculators.
• Include all expenses: monthly payments, insurance, taxes, and maintenance.
• Test scenarios to find a realistic budget.

Remember: Borrowing limits aren’t just about what lenders approve but what fits your financial goals and lifestyle!

Next: Read 2500+ consumer guides to shopping, electronics, appliances, home services, cars, money and more.

❤ If you liked all this, consider supporting us by checking out SkillThing DOING Manuals