Factors influencing how much can you borrow
A mortgage loan is a loan that is taken out in order to purchase property. This may include houses and lands. Any property that you will purchase with the help of a mortgage loan acts as a collateral to the loan. This means that in case you are not able to pay back the mortgage loan the property can be taken away by the lender in order to recover the amount he or she has lent you.
It is very natural for you to ask how much can you borrow. This can be answered only if you consider the factors that influence how much can you borrow. There are 3 main factors that decide how much you can borrow.
These factors are as follows.
1. The sum of your debts: Your lenders will be taking into consideration the total amount of debts you have before you get the mortgage loan. Generally most lenders do not want your long term debts and your housing expenses to be more than 33% to 36% of your gross monthly income. Thus, if you are under a lot of debt, then you should try and clear off most of your debts much before approaching a lender for a mortgage loan.
2. Your total monthly income: As per most lenders your total housing expenses should not be more than 25% to 28% of your gross monthly income. If you want to apply for a FHA loan, then you should have housing expenses that are not bigger than 29% of your monthly income. It is important for you to consider all incomes that you have no matter how little they are. Your total income will comprise of not only the fixed salary that you draw but also the commissions, the overtimes and the bonuses that you get.
3. The amount you will pay as down payment: The amount that you are expected to pay towards the house you are purchasing, out of your own pockets is called a down payment. The lenders expect you to pay at least 20 % of the total value of the house as down payment, the rest you can borrow. Thus, the amount that you can draw also depends on how much you will be able to pay as down payment. You can take out money from various sources in order to accumulate enough to pay the down payment.
These are a few factors that determine how much you will be able to borrow as your mortgage loan. Your lenders are the ones who consider these factors before providing you with the mortgage loan.
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