When qualifying for a mortgage, your income and debts that you have determine what purchase price you are able to buy at. I hear quite often from clients that they have worked hard to build and maintain great credit, saved a down payment and are ready to make the leap into home ownership. However, after I review their eligible income and debts they may be carrying, it is very sad to have to inform them that the price point they were hoping to buy is not achievable due to carrying either a large vehicle payment or credit card debt. I thought I would go over the basics of mortgage qualifying in today’s world. If you have a desire to buy a home whether now or in the near future, think twice about buying a new car or adding credit card debt to your plate.
When calculating what one can qualify for we use two formulas and apply them to your specific financial profile. You need to keep these in mind when starting to prepare for your mortgage pre-approval.