Your debt to income ratio (DTI) is one of the biggest factors lenders use to determine how much you can borrow. DTI compares your monthly debt payments to your gross monthly income. Most lenders prefer a DTI below 43%, though some loan programs allow higher ratios depending on your credit and down payment.
A general rule is to look for homes priced at two to three times your annual household income. If you earn $100,000 a year, that puts your target range around $200,000 to $300,000. Your actual number depends on your debts, down payment, and interest rate. Use this calculator to get a more accurate estimate based on your specific situation.
When determining how much home you can afford, lenders look at four main factors: your income, credit score, existing debts, and down payment amount. A strong credit score and steady income can help you qualify for better mortgage rates and a higher loan amount.
A larger down payment means a smaller loan and lower monthly payments. Putting down 20% or more also eliminates the need for private mortgage insurance (PMI), which can save you hundreds of dollars each month. Even a few extra percentage points can make a difference in what you can afford.
Your mortgage payment isn't your only housing expense. Property taxes, homeowners insurance, HOA fees, maintenance, and utilities all add to your monthly costs. When budgeting for a home in Colorado Springs, factor in these expenses to get a realistic picture of what you can afford.
An affordability calculator gives you an estimate, but getting pre-approved tells you exactly what you qualify for. A lender will review your income, credit, and debts to give you a specific loan amount. The Johnson Team can connect you with trusted local lenders to help you take that next step.
The Johnson Team is a large team that focuses on a small area. Hyper-Local Matters. We are one of the top real estate teams in the state of Colorado because our marketing techniques and drive surpass the competition. Even more than that, it’s because we know our market and we know our neighborhoods. Rather than extending our reach, we go Hyper-Local.