So You’re Ready to Buy a House…
Bydand Home Loans LLC
Bydand Home Loans LLC
Published on January 1, 2023

So You’re Ready to Buy a House…

Buying a house is an exciting and sometimes scary process. After all, you're making one of the biggest purchases of your life! Before you start house hunting, it's important to know the factors that will determine what mortgage you can afford. Here are 5 key aspects to consider when figuring out the answer to this question. 


Your income is an important factor when determining how much house you can afford. Lenders look at your income, debts, and credit history to get a sense of whether or not you can make payments on the loan they are offering. Your income can also determine if you qualify for certain programs, such as VA Loans or FHA Loans, which have more flexible qualifications for borrowers with lower incomes. 


Your debt-to-income ratio is another major factor in calculating what mortgage size you can afford. This ratio measures how much of your income goes towards paying off debts like car loans and credit cards each month. Generally, lenders won't approve mortgages if your debt-to-income ratio is over 43%. This means that if your monthly debt payment obligations exceed 43% of your gross monthly income, it may be difficult for them to provide a loan with favorable terms. 

Front-End Ratio 

The front-end ratio is similar to the debt-to-income ratio but only takes into account housing costs such as principal and interest on the loan, taxes and insurance expenses related to homeownership such as property taxes and homeowners insurance premiums. In most cases, lenders won't approve mortgages if the front-end ratio exceeds 28%. That means that if all of these housing costs exceed 28% of your gross monthly income it may be difficult for them to provide a loan with favorable terms. 

Credit Score & Credit History  

Your credit score is determined by factors like payment history (whether or not you pay bills on time), amount owed (how much money you owe compared to how much loanable funds are available) and length of credit history (how long have you been using credit). Having a good credit score (typically 700+) will open up more options when it comes to loan products and interest rates available from lenders. It’s important that potential homebuyers review their credit report before applying for any loans as this could affect their eligibility for certain types of mortgages or loan terms offered by lenders. 

Down Payment Size

The down payment size plays an important role in determining what mortgage size you can afford. It reduces overall borrowing costs associated with taking out a mortgage while providing some equity in the home upfront. The larger your down payment size is relative to the purchase price of the home. The less money you will need from lenders in order to buy a home. Making approval easier than if no down payment was made at all. 

Bottom Line:

Determining what mortgage size fits within one's budget depends on many factors. Including income level, debt levels/ratios, credit score/history, down payment size and more! It’s important for potential buyers to research these factors before beginning their search for a new home. Being aware of all options available to them when it comes time apply for financing through a lender. With this understanding you'll be well on your way towards finding just the right mortgage fit within no time! Good luck!