Leveraging a home affordability calculator – Determining your mortgage affordability

Are you planning to buy your new home and eliminate all the woes of sharing your room keys with your landlord? Buying a home might seem to be an exciting process especially when you're a first-time homebuyer but when you step into the market to initiate the process on your own, you will know that it is not as easy as you might have thought it to be. A mortgage is a secured loan where you have to pledge your home as collateral and also abide by the agreement where the lender will take over the home in the event of a default. As the consequences of making late payments is certainly drastic, it takes a lot of effort to choosing the right mortgage loan in the market.

Before taking out a home loan, all it takes is to calculate your mortgage affordability so that you know whether or not the loan is within your means or beyond your means. When you make the mistake of choosing a loan that is way beyond your affordability, you might not be able to bear the mortgage loan payments throughout the term of the loan and finally end up in losing your homeownership rights. This is why the mortgage experts always recommend people to determine their affordability before choosing a home loan.

Calculating how much house you can afford- What factors to consider?

The mortgage lenders are primarily concerned about your ability to repay the loan on time and in order to determine whether or not you will qualify for the loan, they will take into account your credit history, gross monthly income and how much cash you can accumulate for the down payment. There are 2 ratios that you need to consider while calculating your home mortgage affordability called the debt-to-income ratios. Read on to know more about the 2 ratios.

• Housing expense ratio: The housing expense ratio is also known as the front-end ratio and this shows how much of your gross monthly income goes towards making your monthly mortgage payment. Your monthly mortgage payment will include real estate taxes, principal amount, interest rates and this shouldn't exceed 28% of the gross monthly income. All such calculations can be made with the help of a home affordability calculator.

• The total debt-to-income ratio: This is also known as the back end ratio and this ratio shows how much of your gross income goes towards all the debt liabilities including the student loan payments, car loan payments, credit card payments and other condominium fees. This back end ratio shouldn't exceed 36% of your gross income.

Using the home affordability calculator to make calculations simpler

All the above mentioned calculations need to be completed before taking out a home mortgage loan. If you don't make the calculations beforehand, you will land up in a mess when you approach the lenders. Therefore it is a wiser decision to download the home affordability calculator and make the required calculations simpler and effortless. Make sure that you download them from authentic websites so that you can trust the results.

Therefore, when you're about to secure a home mortgage loan, take the above mentioned steps to calculate the mortgage affordability. Use a calculator to make calculations simpler and easier.