How Much Mortgage Can You Really Afford for a Santa Cruz Home?

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.

LINKS:

Housing Expense Ratio 

Debt-to-Income Ratio

figure how much home you can afford