As
you think about applying for your Saratoga CA
home loan, you need to consider your personal finances.
How much you earn versus how much you owe will likely
determine how much a lender will allow you to borrow.
First, determine your gross monthly income. This will
include any regular and recurring income that you can
document. It is the average income of a 2 year time period.
Unfortunately, if you can't document the income or it
doesn't show up on your tax return, then you can't use
it to qualify for a loan. However, you can use unearned
sources of income such as alimony or lottery payoffs.
And if you own income-producing assets such as real estate
or stocks, the income from those can be estimated and
used in this calculation. If you have questions about
your specific situation, any good loan officer can review
your documents.
Next, calculate your monthly debt load. This includes
all monthly debt obligations like credit cards, installment
loans, car loans, personal debts or any other ongoing
monthly obligation like alimony or child support. If it
is revolving debt like a credit card, use the minimum
monthly payment for this calculation. If it is installment
debt, use the current monthly payment to calculate your
debt load. And you don't have to consider a debt at all
if it is scheduled to be paid off in less than ten months.
Add all this up and it is a figure we'll call your monthly
debt service.
In a nutshell, most lenders don't want you to take out
a loan that will overload your ability to repay everybody
you owe. Although every Saratoga lender has slightly different
formulas, here is a rough idea of how they look at the
numbers. Typically, your monthly proposed housing expense,
including monthly payments for taxes and insurance, should
not exceed about 28% of your gross monthly income. If
you don't know what your tax and insurance expense will
be, you can estimate that about 15% of your payment will
go toward this expense. The remainder can be used for
principal and interest repayment.
In addition, your proposed monthly housing expense and
your total monthly debt service combined cannot exceed
about 36% of your gross monthly income. If it does, your
application may exceed the lender's underwriting guidelines
and your loan may not be approved.
There are a number of factors within your control that
affect your monthly payment. For example, you might choose
to apply for an adjustable
rate loan that has a lower initial payment than a
fixed rate program. Likewise, a larger down payment has
the effect of lowering your projected monthly payment.
A Saratoga CA lender takes into account many factors that
reflect the financial condition of a homebuyer. With a
variety of loan programs, buying a home is possible.
Contact
us for more info on Saratoga CA home loans. |
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