Owning a Santa Cruz home can be a sign of independence and success. It allows you to build up equity and the mortgage interest and property taxes are tax-deductible. Can you afford it, though?
Reputable lenders look at a list of criteria to decide how much they’ll loan you. This list includes:
• Credit score
• Existing assets including cash
• Car leases or loans
• Credit card balances
• Debt consolidation loans
• Home equity loans
• Installment loans
• Student loans
• Other monthly debts
• Size/source of your down payment
If you’d like to get an idea of what you can afford before talking to a lender, here are a few tools you can use to decide whether a Santa Cruz home is within your budget:
• As a rule of thumb, your house hunting budget shouldn’t be more than 2.5 times your pre-tax annual income. If you earn $50,000 a year, your budget for house hunting should be around $125,000.
• Your Housing Expense Ratio, which is principal, interest, taxes and insurance (PITI) shouldn’t be more than 25% to 28% of your pre-tax monthly income.
• You're Debt-to-Income Ratio should be no more than 36% of your pre-tax monthly income. This is the ratio between how much you owe and how much you earn.
• Use an online calculator to figure how much home you can afford.
“Qualifying for” and “can afford” are two different things. Shopping for a Santa Cruz home within your budget will save you a lot of heartache now and in the future.
If you'd like help determining how much mortgage you can really afford, I can help. Call me at 831.662.6522 or email me at lauren@laurenspencer.com for more information.
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Posted by Lauren Spencer on
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