How Do Lenders Determine Mortgage Loan Amounts?
Purchasing real estate with a mortgage is often the most extensive personal investment most people make. How much you can afford to borrow depends on several factors, not just what a bank is willing to lend you. You need to evaluate not only your finances but also your preferences and priorities.
Key Takeaways
- The general rule is that you can afford a mortgage that is 2x to 2.5x your gross income.
- Total monthly mortgage payments are typically made up of four components: principal, interest, taxes, and insurance (collectively known as PITI).
- Your front-end ratio is the percentage of your annual gross income that goes toward paying your mortgage, and in general, it should not exceed 28%. ? ?
- Your back-end ratio is the percentage of your annual gross income that goes toward paying your debts, and in general, it should not exceed 43%. ? ? 続きを読む
