Why Your Income Matters When Buying A Home
- 2 min
What you'll learn.
- How much can you afford?
- Why your income matters.
Ready to get off the wild ride of renting? We get it and we’re ready to welcome you home. Perhaps you don’t really know where to start or what factor your income plays into getting a mortgage? That’s where we come in.
Searching for the perfect loan for your budget might seem a little scary so we’ve come up with an easy way to look at it. Whether you’ve been saving for years or you’re just putting your toe into the homeowner pool, you’ve come to the right place.
Your lender will evaluate the big picture, your income, your debts, credit history, a down payment and your current financial situation as a whole.
How Much Can You Afford?
The first thing to consider is your income, so we’re looking at your monthly gross income here (this is the pre-taxed number that goes into your paycheck). We need to know how much you make from your employer and how much debt you’re in because that’s a factor into how much you can afford monthly.
Debts are car loan payments, mobile phone payments, student loans, and any personal loans you may have taken out previously that you’re still paying off. Some of those items can take a big chunk out of your paycheck, we will need to factor those in!
Comparing The Right Mortgage Affordability For You
Consider looking at a couple different payment options for a mortgage — 29% of your gross income versus 41% of your gross income. With 29%, think, “I can likely afford this mortgage.” While 41% could be more a stretch, where your other monthly payments and debts would need to be smaller so your mortgage payment doesn’t turn into a burden. For a comparison chart you can read more here.
Remember, qualifying for a certain amount doesn’t mean that’s how much you need to borrow. At the end of the day, only you know what you’re comfortable paying in a mortgage every month coupled with your income, other expenses and debts.
It’s always a great idea to start the homebuying process with a lender, prior to looking at any homes or factoring in your income. The first step most lenders will take is to ask you basic questions about your credit and income. If you’re eligible, they’ll probably issue you a pre-qualification letter, which gives you a more realistic idea of budget. So let’s get started!